OVERVIEW OF SAP
SAP is the world’s largest business software company, which is at the core of the world’s technology revolution. It is the market leader in Enterprise Application Software. The multinational software corporation, builds enterprise software to manage business operations, generate new opportunities for innovation and growth, and help organisations overcome the harmful effects of complexity.
SAP was founded in 1972, having headquarters in Walldorf, Germany. The company was established by five German entrepreneurs who saw business potential in technology. They were engineers who had worked in the AI department in IBM. They left IBM Tech and together started a company called ‘Systemanalyse und Programmentwicklung’. Their goal was try transform the world of information technology. 1
Over the past 46 years the company has grown immensely. The company now has over 335,000 customers in over 180 countries. SAP says they have customers who ‘work in every industry and geographic region you can imagine.’ Based on examinations on market capitalization, SAP is considered to be the third largest independent software manufacturer. 2
SAP was originally a privately owned limited-liability company but, in 1988 publicly traded SAP AG. It then issues it initial public offering, at a share price of DM 750. 3 After years of growth, in August 3rd 1998 SAP entered the NYSE New York Stock Exchange, the world’s largest trading floor.
A market is a company’s percentage in relations to an industry’s total sales. It is the amount of sales a firm makes in comparison with its industry as a whole.4 You calculate the market share by counting the amount of sales a company has over a period and then dividing it by the total sales of the industry over the same period. This calculation then gives a general idea of the company’s size in relation to its market and competitors.
Allied Market Research carried out a study on the software market, which states that the Global ERP is expected to accumulate to almost $41.69 billion by the year 2020 within the software market. 5 From the year 2011 to 2015 the market increased by 6.38%, and is expected to grow by 8.3% between the years 2016 to 2021.
SAP leads the major ERP vendors for overall software market share, which accounts for 23% of the entire market. For many years the market was mainly between SAP and Oracle, but in more recent years it has begun to include more companies.
SAP’s market structure bears a resemblance of an Oligopoly market structure which is when a small number of firms have a large percent of the market share. It’s similar to monopoly, but instead of one firm, two or more firms now dominate the market. There is no boundary for the number of firms, but the activity of one firm must have an outstanding impact on the others. 7
From November 2015, SAP and Oracle are no longer alone as they have been joined by the like of Infor and Microsoft. Oracle is now matched with Infor counting for 16% of the market. While Microsoft follows with 9% of the market. These four leading firms are competing with one another and dominating the market.
Since 1972 when SAP was founded it spurt in both growth and innovation has been extraordinary. Over the years it has changed from having the five founders to over 84,183 employee worldwide today. 8
CEO of SAP is Bill McDermott, whose approval rating from SAP employees on the ‘Glassdoor’ website has been fluctuating in and around 99%. Thus showing great leadership within the organisation. He is an American who advises world leaders on the issue of youth unemployment. 9
Throughout the years SAP has received numerous awards on a global scale. Each reward is a recognition of their excellence and highlight the standard of achievement within SAP. They are a great influence with a strong working environment. From being a top employer in a particular region, nurturing a diverse working environment, or maintaining attractive programs for fresh graduates to develop their careers. These awards validates SAP’s focus on employees success
The work environment created by SAP was very effective and came to show throughout the years. In 2017 SAP’s work ethic was acknowledged for many awards and achievements. SAP have been granted with the official certificate of being the top employers in 15 countries and 3 regions, for its exceptional employee offering. 10
Over the years, SAP’s advancement as a company was extraordinary. In relation to this the level of complexity within the company has risen immensely. One of the prime factors that was affected in this area was pricing. For a number of years customers have been reporting that the company’s pricing was too tough. They then came to a decision that it was time for a redesign. They gathered advice from over 200 customers, along with many of SAP’s staff including accounting executives and legal staff. From this they worked on coming up with a solution for SAP’s pricing.
They came up with a resolution which was to launch a price bundling strategy. It was called ‘360 Customer’ and it was a Customer Relationship Management (CRM) oriented combination which is made up of CRM related tools. These included SAP CRM, its cloud based customer on demand, the SAP jam social software platform and mobile device management services to send content across a range of devices. From this customers had the choice to purchase the package as a whole or to choose individual sections which were at a discounted price.
Once this was released, it was clear to see that 360 Customer was trying to sell a bundle of products to customers who may have only wanted a fragment of it. Hereby it was too large and was too broad for a specific buyer. At the time the CEO, Joseph LA Rosa used SAP’s software for corporate treasure as an example of its improvement to price bundling. SAP now has two different pricing strategy bundles, the first Treasury Operations and the second Treasury and Risk.
Finally SAP examined which products weren’t selling on the ample price list. Once noted they either eliminated the product of the list or added a product within a bundle to increase its sales.
SAP have a considerable large product range to offer, due to this they have been divided into many different sectors, those including:
· ERM and Digital Core
· Cloud and data Platforms
· Procurements and Networks
· Customer Engagement and Commerce
· IoT and Digital Supply Chain
· Human Resources – HR
· Finance 11
Some examples of products SAP have to offer, include:
ERM and Digital Core
SAP S/4HANA Cloud: Which is an ERP suite for digital business. It is built on SAP’s advanced in-memory platform, SAP HANA, and offers a personalised, consumer-grade user experience with SAP Fiori. It integrates business processes and transforms real time data into actions, while also increasing employee productivity. 12
Cloud and data Platforms
SAP Cloud Platform: Is a PaaS Platform as a Service. It provides application development capabilities to help you enlarge, join and construct innovation applications faster than usual. It also requires less maintenance.
Procurements and Networks
SAP Ariba Supplier Risk: Used to help make wise risk decisions all through the procurement process. It secures safety by using a unified vendor data model which gives individual cloud-based supplier record. The platform monitors risk and will send alerts depending on different modifications to suit each business.
SAP ERP: There are many core processes needed to run a company such as finance, HR, manufacturing, supply chain, services, procurement, and others. At its most basic level, ERP integrates these processes into a single system. But new ERP systems are anything but basic. They provide visibility, analytics, and efficiency across every aspect of a business. Using the latest technologies, ERP systems facilitate the flow of real-time information across departments, so businesses can make data-driven decisions and manage performance –live
Customer Engagement and Commerce
SAP Hybris Marketing Cloud: This focus on understanding customers and their needs. Helping a business to engage with customers intelligently, by creating profiles of each customer. This allows a business to gain deep insights that will increase conversion rates and gain loyalty. Therefore giving a clear view of a business’s performance of marketing plans.
IoT and Digital Supply Chain
SAP Integrated Business Planning: It was created to deal with current market expectations. It is designed with supply chain planning features that will assist you to reach demand profitability. Joining you with stakeholders within you community with cloud-based features that combine sales and operations, demand, response and supply planning, and inventory optimisation. 13
SAP SuccessFactors Employee Central: To strengthen HR by ensuring things run smoothly. This is captured by processing payrolls with a cloud based, global solution. HR organisations can design better people strategies, provide actionable insight, and focus on value –add activities that assist your business. 14
SAP Anywhere: This is a front office software solution from SAP SE for small and medium sized enterprises (SMBs) with 10-500 employees. SAP anywhere includes several front office applications that can help retail and wholesale businesses market and sell their product and services through multiple sales channels including in-store, direct sales, and online.
SAP is the leading runner when it comes to Enterprise Resources Planning software. Not only that, SAP also offer application software to over 25 industries and 12 different business lines, those including consumer, discrete manufacturing, energy and natural resources, financial services, public services and other services . 15
The organization is functioning in four different geographic regions, NA – (United States of America and Canada), EMEA – (Europe, Middle East and Africa), LAC (Latin America and Caribbean), and APJ (Asia Pacific and Japan).
SAP’s industry market offers integrated product sets to large establishments, mid-sized corporation and small businesses. SAP operates in six main industry markets, which include process industries, discrete industries, consumer industries, service industries, financial services and public services.
In the year Q2 2017, SAPs Quarterly Statement, shows a strong growth in the cloud. New cloud bookings upped by 33%, reaching $340 million. Also Stellar software revenue was 1.09 billion increasing by 5%, beating a record of 2016 Q2.
Although operating profit is down in IFRS by 27%, Non-IFRS grew 4%. The IFRS operating profit was primarily affected due to the increase in restructuring related expenses and share based compensation expenses in the second quarter. The Digital core business continues to escalate and currently has over 6,300 S/4HANA customers, each year it continues to strive over 70%. SAP’s rapid improvement and cash generation have provided them with remarkable flexibility around capital allocation targeted at driving shareholders value. This resulting in a share buyback of up to $500 million in 2017 and is followed with strong operational cash flows, up 20% in HY. 16
Consolidation Statements of Financial Position of SAP Group (IFRS) –Half Year
In the year ending December 31st 2017, Based on the continued strong momentum in SAP’s business, the Company expects full year 2017 non-IFRS total revenue be in the range of €23.3 billion and €23.7 billion (2016: €22.07 billion).
In the year ending December 31st 2017, SAP posted $23.7 billion in total revenue, therefore the profitability of SAP between 2016 and 2017 has increased.
SAP Share Price Movements
The following table displays a weekly summary of stock price data for SAP for the period 11th September 2017 through January 22th 2018. For the purpose of this analysis I will be looking at the fluctuations from weekly closing figures. Negative Figures in the rise/fall column indicate a rise in stock price, while positive figures represent a fall.
25th September 2017 – 2nd October 2017 (Movement rise of.75)
SAP released the figures for the third quarter on the period ending September 30th 2016. These figures reflected impressively on the company . SAP posted a 19% increase in operating profit for the third quarter of 2017, which was also boosted by increased adoption of its cloud products. Operating profit for the period end was €1.3 billion.
23rd October 2017 – 30th October 2017 (Movement rise of .45)
During the month of October, many updates were introduced to existing products. Within the dates from the 23rd to the 30th the following products were adjusted; SAP Process Orchestration, SAP Extended Warehouse Management, SAP Jam Collaboration, and SAP Cloud Platform Identity Authentication. By rebranding their products it opened up a new market and therefore lead to a rise in SAP’s stock share. 17
4th December 2017 – 11th December 2017 (Movement rise of .47)
SAP saw a rise of 0.47 at the end of 2017. This perhaps was due to the announcement on the 7th of December about how big data would change health care. Thomas Laur, global president of SAP Health, talks about how advanced analytics and big data are transforming the health care industry and what SAP is doing on this front. 18
SAP is all about making people’s lives easier, this goal is captured within SAP’s slogan which is, ‘Run Simple’. Their aim is to progress people’s lives by helping clienteles run at their best. They plan on accomplishing this by guiding their customers to master complexity with simplistic solutions focused on innovation in the cloud and on SAP HANA (SAP S/4 HANA or SAP Simple Finance). Their strategy is to become the key cloud company which will be powered by SAP HANA. Through this they remain focused on the Public cloud (Standard and suite solutions), Business Network (Ariba, Concur, Fieldglass) and the Private cloud on SAP HANA Enterprise Cloud.
SAP has undertook a strategic method to CSR (corporate social responsibility) to help guarantee a sustainable future for both their customers and company. Their tactic is to focus technology on education and entrepreneurship. They aspire to bring positivity through economic development, job formation, innovation and community.
Sap’s head of corporate social responsibility for North America, Kate Morgan wants to guarantee that the future workforce has appropriate technology skills. She accomplishes this through a high level of communication between both leaders and employees about why the strategy makes sense for the business. Kate says that their ” Strategic investment will give people skills, such as SAP certification, as well as training around soft skills, such as how to work in a corporate environment, or how to prepare for an interview. Our funding will be shifting from STEM education and entrepreneurship to workforce development”,
Diversity and inclusion is another core philosophy at SAP. Within the company they believe that differences will enhance the workplace. Differences such as gender dynamics, designing new work spaces to spark innovation, or supporting people in finding their voice will help make it a more enjoyable place of work. They see it more than just a policy but a way of creating a warm welcoming environment. SAP has been recognized as one of the world’s best places to work by many global, national and reginal awards, thus showing that the way they run their business is proving to be a success.
SAP approaches corporate social responsibility (CSR) strategically – to certify a sustainable future for both our society, customers, and company. By aiming our talent, technology, and capital on education and entrepreneurship, we aspire to enact constructive social change through economic growth, job creation, innovation, and community.
SAP identifies and embraces its dedication to the communities. They suspect that the private sector plays a vital role in building a level playing field, driving innovation and creating an environment that enhances education and entrepreneurship to foster economic growth. 19
Their social investment strategy is based on a vision to help the world run better and improving people’s lives. Their approach is driven by four core principles:
· Create social impact
· Leverage our core expertise
· Generate lasting impact on SAP
· Engage multiple stakeholders
ADVERTISING AN PROMOTIONAL STRATEGY
From the very beginning, SAP have organised a number of large scale advertising campaigns all around the world. As seen earlier the company assembles their fundamentals on the concept ‘Run Simple’. From this slogan many campaign strategies emerged such as ‘Run’, ‘Run Simple’, ‘Run Better’ and ‘Run Like Never Before’. This is essential creating a brand around the company, where the key enforcement is to essentially, Run SAP.
The ‘Run Simple’ commercial is about how SAP simplify everything and how they can do anything. SAP helps you streamline your processes, so you have the ability to create new growth opportunities for your business with the world’s most innovative platform.
The ‘Run Like Never Before’ campaign was launched celebrations SAP’s 40th anniversary in February 2012. Throughout the advert it explains how SAP mobile solutions let business people manage their pipelines, launch promotions or redeploy remotely and securely. SAP also use social media such as Facebook, LinkedIn and Twitter to promote the campaign.