Forbes  4 hrs ago  Comment 
By Jennifer Schulze, Marketing Executive, SAP
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SAP AG (NYSE: SAP) is the world's leading provider in business software and is the top provider in 20 of the 25 industries that it serves. SAP makes software programs that increases or examines the productivity in specific parts of a company, such as customer relations, enterprise resource planning, accounting, human resources, and others. SAP's main revenue streams come from the licensing of business software, providing maintenance services, and consulting. Over 75% of revenues come from SAP's 32,000 enterprise customers.[1] SAP focuses on vertical industries, such as media, which helps provide growth as these industries expand. A potentially large area of growth could come in the relatively new services-oriented architecture (SOA), which enables the customers to link and connect its various applications. SAP expects its SOA, called NetWeaver, to be well received by its large installed customer base. Many of the industries SAP operates in are fragmented in terms of the software brands used. At the same time, there has been a trend towards consolidating software providers and that is expected to help SAP and Oracle as they are the two largest software companies.

As of December 31, 2009, the Company had more than 95,000 customers in over 120 countries.[2] As of December 31, 2009, SAP AG was the parent of 163 subsidiaries.[2] In July 2010, SAP AG completed the acquisition of Sybase, Inc., whereby Sheffield Acquisition Corp., a subsidiary of SAP AG was merged with and into Sybase, Inc., with Sybase, Inc. surviving the merger as a wholly owned subsidiary of SAP America, Inc.[2] In September 2009, the Company acquired a 63.12% majority shareholding in SAF Simulation, Analysis and Forecasting AG (SAF), a global forecasting and replenishment software company operating in the retail and wholesale industries. In October 2009, the Company acquired 70.67% stake in SAF AG.[2]

Company Overview

SAP develops and sells business application software and offers services related to the products. SAP is listed on the German DAX index and at the New York Stock Exchange.

Business and Financial Metrics

The companies fiscal year starts January 1 and ends December 31. SAP is reporting according to the US GAAP standard. Reporting currency is EUR.[3]

Second Quarter 2010 Results[4]

SAP reported revenue of €2,894 during the second quarter of 2010, an increase of 12% compared to revenue of €2,576 in the second quarter of 2009. Operating profit totaled €774 compared to to €641 in the year-ago period. SAP's operating margin increased from 24.9% in Q2 2009 to 26.7% in Q2 2010. Basic earnings per share for the quarter was €0.41 compared to €0.36 in the year-ago period.

Business Segments

SAP Business All-in-One[2]

SAP Business All-in-One solutions helps companies manage everything from financials, human resources, procurement, inventory, manufacturing, logistics, product development, and corporate services, to customer service, sales, and marketing. SAP Business All-in-One solutions are available from a network of qualified partners that deliver more than 700 industry-specific solutions in more than 50 countries.

SAP Business One[2]

The SAP Business One application provides a single, integrated solution for managing the entire business, including support for financials, sales, customer relationships, inventory, and operations. With its published software development kit and over 550 industry-specific solutions and functional add-ons, SAP Business One can be extended to meet specific business processes and changing needs.

SAP Business ByDesign[2]

SAP Business ByDesign is a single on-demand solution that comprises functions of SAP Business Suite and therefore delivers best practices for financial management, customer relationship management (CRM), human resources (HR), project management, procurement, and supply chain management. SAP Business ByDesign can unify multiple business operations. It can enable companies to implement preconfigured business processes to solve immediate problems. The SAP BusinessObjects portfolio also includes solutions specially designed for small businesses and midsize companies, which include SAP BusinessObjects Edge solutions; Xcelsius; Crystal Reports software; Crystal Reports Server; SAP BusinessObjects Interactive Analysis software; The SAP BusinessObjects Access Control application, and The SAP BusinessObjects Global Trade Services application.

Solutions for Sustainability[2]

The SAP BusinessObjects Sustainability Performance Management application helps enterprises focus on strategic execution of their sustainability initiatives- balancing social, environmental, and economic performance. It provides a comprehensive sustainability reporting process, from reporting framework definition to data collection workflow and reporting.

Solutions for Energy and Carbon Management[2]

SAP Carbon Impact is an on-demand solution to assist enterprises in implementing strategies for reporting and profitably reducing their carbon and environmental footprint. The solution helps companies measure, mitigate, and monetize carbon emissions and other environmental impacts across business operations.

Solutions for Environment, Health, and Safety[2]

The SAP Environment, Health, and Safety Management (SAP EHS Management) application addresses industry needs for product safety, hazardous substances, and dangerous goods handling of products across a wide range of industries, including chemicals, consumer products and high tech. The SAP Recycling Administration application can help ensure compliance with worldwide recycling legislation for packaging, batteries, and waste electrical and electronic equipment.

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Finance Plan for SAP Solutions[2]

With a global partner of its, Siemens Financial Services GmbH (SFS), the Company offers SAP Financing, a service that helps companies invest in SAP solutions. SAP Financing is offered to customers in more than 45 countries by SFS and other IT financing specialists.

SAP Custom Development[2]

The SAP Custom Development organization develops individualized, customer-specific solutions and business functions on the SAP platform covering the life cycle of services to develop and support custom solutions at every stage. SAP’s support units offer a range of services to support its customers before, during, and after implementation of its software solutions.

SAP Consulting[2]

SAP Consulting offers planning, implementation, and optimization services for business solutions. The SAP Services portfolio includes business transformation services, such as Executive Advisory Services and Business Process and Platform Services.

SAP Education[2]

The offerings of SAP Education assist SAP customers and partners with knowledge transfer, maximizing the value they can create with their SAP solutions. SAP Education offerings include training needs analysis, certification assessments, learning software, and tools.

Other Services[2]

The SAP Managed Services organization provides application management services and hosting services, running and managing SAP solutions on behalf of customers. Its members are a host of software partners, system integrators and resellers, technology partners, developers, industry specialists and SAP software users.

Trends and Forces

Undercutting Support Services

There are many new small companies that have based their business on offering support and maintenance services specifically for SAP software. These companies offer their services at sometimes up to a 50% price discount.[5] This increased competition from these specialized companies will likely thin out SAP's margins for its support and maintenance segment in the next several years. However, a growing number of acquisitions in the software industry is beginning to lower the supply of software and ease the price pressure for SAP.

Consolidation of Software

Software applications are becoming more numerous, complex, and integrated in the workplace. This has led many organizations to start consolidating software providers. This is expected to benefit SAP and Oracle most as they are the two largest software providers.

Services-Oriented Architecture (SOA)

SOA helps organizations link their applications to help easily transfer, compare, and relate different data and systems. Instead of having specific software programs existing and functioning independently, SOA allows the commonly used functions in the different programs to be accessed and used from any of the different departments and also externally from the company so partners can access it as well. This is an emerging industry that is expected to be very beneficial for customers. SAP's SOA product is called NetWeaver. SAP has a large installed base of customers, over 32,000, and these existing customers should help boost the growth of NetWeaver sales.


Oracle (ORCL): Oracle is the largest data storage software provider in the world and the second largest business software provider behind SAP.

Salesforce.com (CRM): Salesforce.com is a hosted software application provider that offers its services through the web.

Epicor Software (EPIC): Epicor develops enterprise application software primarily for middle-sized companies and subsidiaries of larger companies.

Lawson Software (LWSN): Lawson provides enterprise software to companies worldwide.


  1. Information retrieved from Morningstar.com
  2. 2.00 2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09 2.10 2.11 2.12 2.13 2.14 Reuters: SAP Company Profile
  3. Annual Report / Form 20-F for 2007
  4. SAP Investor Relations: "SAP Reports 16% Growth in Software and Software-Related Service Revenues for the Second Quarter" July 27, 2010
  5. Information retrieved from Morningstar.com

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