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SAP SE is one of them. The German multinational software solution company first appeared on the scene in 1972. You may not have heard of SAP, but you probably bought some of the products of one of its clients.
The tech giant helped Apple, Amazon, and Google to get where they are now. What has SAP accomplished in the last 50 years, and what might its future be? Take a look.
What Is SAP
SAP SE was founded in Germany by five former IBM employees with a shared vision of creating a software product to integrate various business processes in real-time.
Before selling its license to international clients, the group produced many versions of SAP's enterprise resource planning software (ERP), the first known as RF. Burger King, The Coca-Cola Company, and others were among them. SAP has become a separate industry.
SAP has seen actual adoption rates through the 2000s, moved online to support modern electronic commerce, and today, it generates a revenue of more than EUR 5.1 billion.
Its latest ERP is SAP S/4HANA which introduces mobile integration and a cloud edition for businesses with dispersed workers.
SAP software's meteoric rise to become a vital business tool has revolutionized industries and opened up new employment opportunities in SAP implementation.
Eursap, a recruitment firm, explains the advantages of this career. SAP is used in enterprise companies from all industries and offers challenging work that teaches cross-transferable skills.
SAP Faces What Challenges?
With decades of pioneering to its credit, SAP will look to stay ahead of the trends and competition in the years to come.
The company, which has successfully navigated changes like the shift to cloud and e-commerce, must keep a close eye on new technological developments. What obstacles might SAP face?
Uncertainty About the Future
That may, however, take some time. Initial economic uncertainties are likely to influence future business. The Ifo Business Climate Index in Germany, the consumer mood, and financial forecasts for Germany and worldwide are all pessimistic.
The soaring energy costs, and the interruptions of supply chains, such as the COVID-19 shutdown in Shanghai, China, are all causing SAP managers to be concerned.
Waldorf's company is stable, despite recent growth that has been relatively modest. The manufacturer made a tidy EUR 27.8 billion (about US$ 32 billion) last year and earned EUR5.4 billion in profit.
That is a mere two percent increase over the results of the year before. Microsoft has seen double-digit increases among software companies.
There are plenty of ways to criticize these numbers. It is important to remember that SAP's growth over the years has been unparalleled.
Only three interruptions occurred during times of global crisis: In 2003, after the burst of the dotcom boom (a sales drop of 5.2%), in 2009, following the Lehman bankruptcy and the subsequent global economic recession (a sale drop of 8.5%) and finally in 2020 during the COVID-19 Pandemic's first year (a mere 1.1%).
SAP has seen its annual revenue more than quadruple since 2000. Profits increased even by nine times during this time.
From just under 24,000 employees, the number has risen to over 107,000. SAP is the only software company that can compete with SAP in Europe and Germany. Software AG has tried for many years but failed to reach the magical mark of 1 billion euros in sales annually.
Silver Lake's entry as an investor at the end of 2021, the Darmstadt-based firm, should give it the needed momentum.
The following biggest software companies in Europe are still far from SAP. Dassault Systemes, a French company, recently had sales just below EUR4.9 billion.
Sage Group in Britain produced around PS1.85 billion (around $2 billion).
Others are ahead of us in the world. Microsoft, the world's biggest software company, had revenues of $168 billion during the fiscal year 2021, which finished in mid-last year.
Oracle, SAP's arch-rival, achieved over $40 billion in annual revenues.
Structure Change
The entire software sector is experiencing a profound structural shift. Cloud computing and its associated subscription-based usage models have gradually replaced the traditional license maintenance business.
The Oracle CEO at that time boasted about his ability to achieve profit margins of over 80 percent by just maintaining software. Oracle's customers were not happy with this, as they had to continue paying large amounts to Oracle for maintenance and development.
Other players are preparing to shake up the business software market in global markets with the cloud paradigm. The incumbents face a group of new software companies familiar with cloud computing and do not have legacy systems.
We began as a provider of CRM software, and it's "no software" tagline has irritated the older software giants. It is also a success: it has grown unheard of over the past few years, and SAP has felt its pressure for a long time.
The company is aiming for annual sales of $22 billion. SAP aims to reach a revenue of EUR 29 billion by 2022.
SAP still needs to work on moving to the cloud even though the German software giant has had the issue on its agenda for nearly two decades.
The beginnings of the cloud were complex. It became apparent that tomorrow's software would need to be restructured after the new millennium. The new business applications had to be flexible, modular, and accessible online.
That was based on a concept called service-oriented architecture (SOA).
SAP began a massive project. Project Vienna and its new A1S version were soon the subjects of much speculation in the industry.
It was described as software for SMEs and a modular building kit for SAP's entire portfolio. There was a lot of confusion in the end. The project was thrown into chaos by disputes between a veteran SAP manager, who joined SAP after purchasing Israeli software company TopTier and rose quickly up the SAP hierarchy under Hasso's Plattner.
The project's timelines and costs spiraled out of control.
As a direct result of its experiments in this area, SAP presented Business ByDesign (2007) - a standard on-demand ERP solution geared primarily towards small- and medium-sized enterprises.
The software could never take off due to technical problems and performance issues. SAP has been accused of wasting billions in development. The company announced in 2013 that it would realign its development resources.
Business ByDesign has disappeared. First cloud attempts had failed.
What if SAP software had now devoted all of its resources to its in-memory HANA database, the product that would become the foundation for SAP's software in years to come? SAP ERP systems were previously dependent on an external database, usually Oracle or DB2, by IBM.
That was to Plattner's dismay. The software group could counteract this by using its powerful product to end this dependence. The software group also laid the groundwork for S/4HANA - a cloud-based suite of products introduced to customers in 2015 as a successor to Business Suite.
Turning Point
SAP's transformation began with the global financial crisis that followed the Lehman collapse and its first forays into the cloud.
In the early decades of SAP, management, and product development were conducted orderly and calmly. In the 1980s, the R/2 mainframe software was introduced, and then the R/3 system for client servers took over in the 90s.
During those years, the founders maintained a firm grip at the helm. Dietmar Hopp was CEO from 1988 until 1997. After that, there was a year-long transition with dual leadership, and finally, brought his protégé to the team and was in charge until 2003.
Led SAP from 2009 until Plattner retired to the Supervisory Board.
Aftershocks from the times can still be felt to this day. After raising maintenance charges almost overnight, the new SAP CEO sparked a revolt among customers, costing him his top position at SAP in less than one year.
Two managers who were not German took over his place.
We changed the strategy of SAP's cloud when he became the sole CEO after Snabe's resignation in 2014. The American dug into his pocket and purchased one cloud provider after another.
SAP has spent more than 26 billion dollars between 2011 and 2018 on SuccessFactors, Ariba, and Concur.
Clash of The Developers
The organization was overwhelmed by the speed and volume of the acquisitions. After one another, the heads of acquired cloud companies -- Lars Dalgaard from SuccessFactors (Ariba), Robert Calderoni from Ariba, and Steve Singh, the founder of Concur -- who were to lead the German software giant into the next age -- gave up.
It was partly due to the clash of cultures. On the one hand, the Walldorf development team was focused on German engineering precision. In contrast, the startup teams were happy to accept an 80-per cent solution to maintain the pace.
SAP continues to work on integrating its many cloud-based purchases, partly due to customer demand. The cloud products still operate independently, like satellites orbiting around SAP's gravitational center.
SAP's core has also undergone a massive change. SAP launched S/4HANA at the start of 2015. Users can run it on-premises or in the private or public cloud.
The change has been difficult, but it is not impossible. Many users have invested significant money in the SAP Business Suite or ECC product. Many wonder why they should switch.
It is difficult for many to justify such a complex project. The migration would cost a lot of money and could take many years.
Not all businesses want to migrate their SAP systems to the cloud. Most companies prefer to keep their data centers.
Attractive offers like "Rise With SAP" are not enough to alter this. The company introduced this initiative at the start of 2021. It was designed to help customers move more quickly to the cloud by providing a comprehensive product-service package and a single point of contact and contract partner – SAP.
According to a German SAP User Group survey, many users are still unsure how the entire thing will work.
S/4HANA is having trouble getting started. Users are often forced to get started because maintenance on the previous software will soon end.
The new release generates little enthusiasm.
Necessary Changes
It will need to adapt to maintain a prominent position in the market for business software in this age of the cloud.
It is no longer the case that the SAP system was solely responsible for corporate IT. Users today want the fastest and most flexible software available from multiple providers. Infrastructures have become more complex, with on-premises elements, increasing cloud components, and computing power on the edge.
SAP still needs to establish its place in the new world. Waldorf's company always highlights how crucial the cloud will be for its future.
As a cloud provider, SAP does not play a significant role in the market. SAP and many of its competitors tried positioning itself as a cloud provider years ago. SAP could not match the investment and pace of Hyperscalers like Amazon Web Services, Google, or Microsoft.
The German software giant now works with major cloud providers, allowing anyone to run S/4HANA in their data centers.
Digital transformation is a significant part of business today. SAP must find an urgent answer to how it can help customers with its software.
Customers have expressed their doubts repeatedly in recent months. SAP remains a vital component of the ERP engine to run the business. The music of digitalization is not playing in financial accounting, order processing, or materials management.
It's at the interface with the customers, customer experience, and workflow management.
SAP is a flank that has opened up at these points. It has been too occupied in recent years with consolidation after the period.
The US executive abruptly left his position as SAP's chief executive at the end of 2019. Personnel turmoil was reaching its peak. Bernd Leukert, the Chief Technology Officer of the Group at the start of 2021, turned away from the group.
It announced in April his resignation as a long-serving SAP Manager.
A New Generation
The departure from the SAP management ranks continued. SAP's an SAP veteran, and The Chief Human Resources officer, left in February 2020.
SAP was hired to replace the previously responsible for Microsoft Germany and appointed Chief Operating Officer in mid-2013, along with her HR responsibilities.
The next surprise came shortly before the 50th anniversary of the company. The market was quite upset when CFO Music made his announcement.
Music, seen as a stabilizing factor in SAP management and the foster dad of the CEO, had a good reputation. The insiders believe that music was forced to accept the blame and sacrifice, amongst other things, because of the mistakes made in cloud strategy.
The youngsters now have to show themselves. The patience of the investors and Hasso's protective hand in the background will determine how much time the youngsters have to re-route the SAP tanker.
Financial markets have been watching SAP closely, mainly since Project Management's Paul Singer, who isn't known to treat managers gently, has been at the table with SAP since 2019.
The share price isn't going to rocket. The stock price plummeted from EUR140 to EUR90 when it was forced to abandon growth goals in October 2020.
There have been many ups and lows since then. The share price reached EUR130 in the fall of 2020 and is now hovering at EUR100.
Take and Give
SAP CEO needs help. To be able to surf the digital wave, he needs to have a story about his future. He must also do some research and organize the portfolio.
For many years, SAP users have been bugging SAP to improve the integration and harmonization of data between software components.
There also needs to be some clarification regarding the business functions and products. The disorder ranges from technical foundations NetWeaver and SAP Cloud Platform, and now Business Technology Platform, BTP -- to applications.
It needs to be clarified which edition of S/4HANA you should use -- private cloud, public cloud, or on-premises.
We promised that he would meet the demands of his customers. We stressed from the start the importance of maintaining good relationships with customers.
In the early years of SAP Productized, developers developed the first software versions in customer data centers. This spirit is what he wants to restore. SAP is happy that so many of its customers are loyal and patient.
DSAG is the user group celebrating 25 years of existence this year. It emphasizes partnership and a shared future.
One greeting said, "It is a continuous give-and-take," which is why our collaboration has succeeded.
SAP, The German Tech Giant, Turns 50
The German software company SAP was founded in 1972. Although it began as an April Fool joke, the founding members had no misgivings about the intentions of their founders.
SAP now counts among its clients 99 out of 100 global giants. In 2021, SAP's main markets were Europe and Asia.
The company generated a revenue of approximately EUR 28 billion (USD 32 billion). SAP invests heavily in understanding the global challenges and specifics of different processes.
They do it better than anyone else.SAP is the first and only German tech giant to have achieved world-class status. The company is no lone wolf, but its origins are similar to those of American companies like Apple and Microsoft that grew up in Silicon Valley.
The Five Fabs
SAP, short for System Analyze Programmentwicklung (System Analysis Program Development), started in Walldorf, a small German town just south of Heidelberg.
In Walldorf, a small German village south of Heidelberg, five former IBM workers set out to automate business processes that were done manually up until then.
Two founding members experimented with a pilot app to fix a software problem for a client while still working at IBM.
They took their rights to the new software when they left IBM. The prevailing view then was that companies had too many different processes to allow for standard software to be developed.
The Darkness of Night
The company's employees tested its software in the evenings and on weekends when nobody used it. They created a system that handled invoicing, inventory, and accounting in just three years.
The software was an instant hit. SAP became a hit. Companies in and out of Germany started using it. It allowed companies to centralize data and functions.
Early in the 1990s, Microsoft began collaborating on porting its software onto the Windows NT system. IBM, Burger King, Coca-Cola, General Motors, and Burger King were among the significant players who signed up.
The company became public in 1998 on the New York Stock Exchange, and its workforce increased by nearly 50%. It now has over 20,000 global employees.
DW's New York City markets correspondent. We said that few German firms are left trading on US exchanges. SAP is the latest German stock to list on the NYSE and the biggest tech company in Europe.
Tech is dominated by the US, Asia, and countries such as China, Japan, and South Korea. SAP is an exception."
Head in the Cloud
Fast forward to December 20, 2021. The Waldorf-based company said it employed over 107,000 employees and had 440,000 clients in 180 countries.
Despite its popularity among global giants, small and medium-sized businesses make up 80% of their customer base. SAP estimates that the clients it has generated 87% of international trade, which is $46 trillion.
Cloud technology is becoming increasingly crucial for SAP solutions with the growth of digital economies.
Cloud revenue generated EUR9.4bn in 2021 out of total revenues of EUR 27.84bn. The company hopes that by 2025 it will be able to generate more than EUR 22 Billion in revenue from the cloud alone.
Bottom line
SAP's customers must be convinced that investing in this tool can pay off even when the economy is challenging. It is up to SAP whether it can convince customers about the advantages of its new sustainable cloud solutions.
Early indications are encouraging, though, as nearly two-thirds of owners desire to become more eco-friendly in their business operations. SAP must also consider ways to attract developers to the SAP community to maintain its relevance.
