SAP’s mission is to help every customer become a best-run business.
SAP is a software provider whose offerings enable companies to manage operations and customer relations. The firm has two reportable business segments: Cloud/Software and Services.
In the early 1970s, as part of its effort to leave the computer market, Xerox requested that IBM migrate its business systems to IBM’s technology. In return, Xerox gave IBM the rights to SDS/SAPE software. Afterwards, an IBM customer asked the company for an enterprise-wide program to run on its mainframe. IBM tasked five of its German engineering workers with writing the program, ordering it to be based on the SDS/SAPE software; these individuals were Dietmar Hopp, Hasso Plattner, Klaus Tschira, Claus Wellenreuther, and Hans-Werner Hector. In 1972, when they were well into the process, they were told that the project would be redirected to a different unit.
Rather than dropping the effort, the group decided to leave IBM and found a company to develop and market it: SAP. SAP was originally an acronym for “Systemanalyse und Programmenentwicklung“ (Systems Analysis and Program Development); however, it would eventually be changed to mean “Systeme, Anwendungen, und Produkte in Datenverarbeitung“ (Systems, Applications, and Products in Data Processing). The firm initially did not have access to financing from venture capitalists, banks, or the German government, so it began building through revenue from early German customers, who included Siemens, BMW, and Imperial Chemical Industries (ICI).
SAP‘s solution was an application software that enabled real-time data processing. Because it was standalone, it could be used by other parties. The product proved popular, and by the end of the first year SAP had a staff of nine and had earned DM 620,000 in revenues. In 1973 SAP developed a financial accounting system, RF, which would be the cornerstone of other software modules. In 1974 it converted RF from the DOS operating system to OS, revealing its flexibility. At this point its customer base had grown to 40. By 1975, its new RM system could be used to handle purchasing, invoice verification, and inventory management. This integration became SAP’s trademark.
In 1976 SAP declared itself a GmbH corporation (limited company). In 1977 it welcomed its first non-German customers, from Austria. In 1979 it released R/2, a mainframe-based software suite that enabled consolidation of operational and financial data into a single database. Modules in the suite were standalone, meaning customers could choose only the ones they needed. The solution presented many benefits, including less data entry, uniform data flow, and centralized decision-making. With the help of word of mouth, SAP began garnering clients outside Europe, including major firms such as General Mills, Shell Oil, and Dupont.
In the 1980s SAP developed and released R/3, a software product for use in a client-server, which is a non-mainframe, decentralized computing environment. The server enabled a client to view its entire operation as an individual, integrated process in which information entered in one application would be automatically registered in all others. By 1987 the company had 450 workers and revenues of DM150 million. In 1988, in an effort to raise more capital for R&D, it went public. From then on, it expanded and became an international leader in the worldwide client-server software sector.
Business model of SAP
SAP has a mass market business model, with little differentiation between customers. Its customers are any enterprises that wants software for the purpose of managing operations and employees.
SAP offers two primary value propositions: innovation and brand/status.
The company has a long history of introducing innovating projects, ranging from its groundbreaking ERP software to its recently released SAP HANA in-memory platform. Beyond this background, it also has three major initiatives specifically dedicated to innovation:
SAP Labs – These are facilities focused on enhancing core SAP products and developing new cutting-edge offerings based on SAP HANA. The company operates 16 labs in high-tech clusters in 13 countries worldwide, and has worked on projects for 98 of the 100 most valuable worldwide brands.
Innovation Center Network – This program aims to combine the agility and creativity of a startup with the resources of a major corporation. It identifies multidisciplinary teams (featuring product experts, engineers, designers, business developers, etc.) and connects them so they can collaborate on a wide variety of projects. Specifically, they develop unconventional concepts with the goal of opening up new markets for SAP’s products; examples include smart traffic solutions and customized cancer therapy.
Global SAP Co-Innovation Lab (COIL) Network – This program aims to improve the capabilities of SAP’s customer and partner ecosystem through a network of global expertise and leading technologies. Specifically, it enables members to engage in innovative project-based efforts. Resulting products are displayed at COIL events, facilities, and the SAP Community Network.
SAP maintains a strong brand. It is well-established because of its long history, which includes many firsts. It is well-regarded because of its success. The company is the top player in the enterprise applications industry in terms of revenue from software and related services. It is also the third largest independent software producer based on market capitalization. It has over 12,000 partner firms and over 300,000 customers, with its client base including 87% of the Forbes Global 2000.
SAP’s main channel is its direct sales force. The company also sells its products through resellers, systems integrators, service providers, infrastructure providers, and third-party software vendors. SAP promotes its offerings through its website, online advertising, and participation in webinars and in-person events such as conferences and forums.
SAP’s customer relationship is primarily of a self-service nature. Customers utilize the service through the main platform while having limited interaction with employees. The company’s website features a section called SAP ONE Support Launchpad, a collection of self-help tools and resources including articles and product overviews. SAP also offers online training and certification courses.
There is also a personal assistance component in the form of paid live training classes and phone, e-mail, and live chat support. Moreover, the company offers consulting services for areas such as business transformation services, cloud professional services, and custom application development. Finally, there is a community element with a forum called the SAP Community Network (SAP).
SAP’s business model entails designing and developing new software products.
SAP maintains the PartnerEdge Program, through which it aligns with companies who want to do the following:
Build Solutions – The company assists firms that develop applications and software based on SAP platforms. Types of partners include developers and independent software vendors (ISVs), as well as OEMs seeking to bundle SAP technologies with their own products.
Sell SAP Solutions – The company works with firms that resell SAP offerings. They may be assisted at any point of the customer lifecycle ranging from sales to implementation. Specific forms of support include training and marketing resources.
Service SAP Solutions – The company works with firms that offer consulting and implementation assistance to customers as they implement and integrate SAP solutions.
Run SAP Solutions – The company works with firms that seek to host and run SAP offerings for their clients so the customers can focus on growing their businesses.
SAP’s specific partners for the above purposes include Hewlett-Packard Enterprise, Smart Utility Systems, Macromicro, Innovapptive, OpenText, Accenture, Intel, and IBM.
Finally, SAP maintains the Startup Focus Program, through which it works with promising startups in the predictive analytics, real-time analytics, and Big Data space. It helps the firms build applications on the SAP HANA platform, providing them with funding, sales/marketing support, and access to its community of thought leaders and customer base of over 300,000.
SAP’s main resource is its technology staff members, who are constantly working to introduce new, cutting-edge technologies. The company also relies heavily on its sales/marketing team so that it can keep bringing in new customers. Finally, its many research facilities represent a significant priority.
SAP has a value-driven structure, aiming to offer a premium proposition by supplementing its products with training and consulting services. Its biggest cost driver is sales/marketing expenses, a fixed cost. Other major drivers are cost of services, a variable cost, and R&D and administration expenses, both fixed costs.
SAP has three revenue streams:
Cloud subscription sales
Software licensing fees
Service (training and consulting) fees
Pricing information for each is not readily available.
Chief Executive Officer
info: Bill earned a Bachelor’s degree from Dowling College and an MBA from Northwestern University. He previously held senior executive positions at Gartner, Siebel Systems, and Xerox Corporation. He has 30 years of experience in business technology.
President, Global Customer Operations
info: Robert earned a degree in Accounting at the University of South Africa. He previously served as President of SAP North America and Chief Operating Officer of SAP. He leads the company’s field revenue and enablement operations.
Chief Financial Officer
info: Luka earned a joint executive MBA from ESSEC, France, and Mannheim Business School, Germany, and a Master´s degree in Law from the University of Heidelberg. He began his career at SAP in 1996 and leads its finance and IT processes.
Chief Human Resources Officer
info: Stefan earned a Master’s degree in Economics from the University of Constance. He previously served as HR Manager at Microsoft and led HR operations at Compaq Computer in Europe. He joined SAP in 2002 and leads its various HR functions.
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