Letter from the Co-CEOs

 

From left: Jim Hagemann Snabe, co-CEO , Bill McDermott, co-CEO

Dear Shareholders, Customers, Partners, and Colleagues,

As SAP celebrates its 40th anniversary, the world looks very different than it did in 1972. More than ever, it is a world of connections. Economies are increasingly dependent upon one another. Companies are truly global, and operate within broader ecosystems that include partners, customers, and even competitors. Populations continue to converge in urban areas – where people are living better, longer lives, yet putting immense strain on resources and our climate. Sustainable consumption is no longer optional, it is a necessity. 

Much of today’s connectedness has been brought about by the emergence of digital technologies, which continue to evolve at incredible rates. The amount of data on the planet is doubling every 18 months. By 2013, more than 15 billion mobile devices will be connected to the Internet. Already, 80% of new software offerings are available from the cloud, making them easy and efficient to use. And over 1 billion people are linked virtually via social networks. These developments represent an immense opportunity. Technology, in particular innovative software such as ours from SAP, can make sense of the digitized world, helping it run better and more sustainably, while improving people’s lives. That is our vision at SAP, and it forms the foundation of our customer-driven innovation strategy. 

We executed with excellence against this strategy in 2011. More organizations than ever before turned to SAP to help them innovate for growth, optimize the use of resources, and inspire people to be their best. This led to double-digit growth for us in every quarter. We exceeded market expectations with full-year non-IFRS software and software-related service revenue growth of 15% (17% at constant currencies). Full-year non-IFRS operating profit reached €4.71 billion (€4.78 billion at constant currencies), resulting in a full-year non-IFRS operating margin increase of 1.1 percentage points at constant currencies to 33.1%. These results are proof that our strategy of growth through innovation is winning in the marketplace. Our innovations are not only creating growth in new productproductDeliverable software unit that customers can view, install, and renew. areas, but also driving strong demand for our core applicationscore applicationsStandard business applications available in SAP Business Suite, including SAP ERP, SAP Customer Relationship Management (SAP CRM), SAP Product Lifecycle Management (SAP PLM), SAP Supply Chain Management (SAP SCM), and SAP Supplier Relationship Management and analyticsanalyticsData analysis typically generated in the form of reports and charts which can be used for business insight and decision making. software. 

Delivering Value in Five Market Categories

We deliver value to our customers through industry-specific and line-of-business solutions across five market categories: Applications, analyticsanalyticsData analysis typically generated in the form of reports and charts which can be used for business insight and decision making., mobile, cloud, and database and technology. In 2011, we made significant progress in each of these categories: 

Applications: In applications, we introduced the SAP Business SuiteSAP Business SuiteA family of integrated core applications, industry applications, and supplementary applications, built on the SAP NetWeaver technology platform. The software supports core business operations ranging from supplier relationships to production, warehouse ma Innovation Road Maproad mapProduct timeline that has a variety of objectives, including communication to customers, users, or other interested parties the timing of future product releases; the features planned for those releases; general prioritization of features; and in some cas. It provides customers with more innovation, less disruption, and greater long-term predictability through the extension of maintenancemaintenanceSoftware support comprising support for legal changes and corrections delivered through the SAP Notes tool, support packages, problem support, and access to information and online service channels – depending on the maintenance phase. until 2020. We also ramped up the delivery of SAP Rapid Deployment solutionsSAP Rapid Deployment SolutionsAn installation of preconfigured software and predefined services with content including best practices, templates, tools, and business user enablement with predetermined scope, time, and costs. Because the solutions are installed quickly, customers can b, which are software packages that are preconfigured with our industry expertise, allowing customers to reduce deployment time to as little as six weeks. With the acquisition of Right Hemisphere, we took an important step to further improve the user interface of our core products. 

AnalyticsanalyticsData analysis typically generated in the form of reports and charts which can be used for business insight and decision making.: Our analyticsanalyticsData analysis typically generated in the form of reports and charts which can be used for business insight and decision making. solutions give customers the power to turn insight into action by providing visibility into the data they need to run their business more effectively. In 2011, we introduced our latest portfolio of powerful analyticsanalyticsData analysis typically generated in the form of reports and charts which can be used for business insight and decision making. solutions. They enable our customers to better understand all facets of their businesses and make confident, fact-based decisions as events unfold in real time. 

Mobile: The trend to mobile continued in 2011. With our mobile solutions, customers benefit from new consumption models, device management, and the most robust security. We also brought the power of the enterprise into employees’ hands by releasing more than 50 mobile apps that allow our customers’ employees to work at any time and from anywhere via mobile devices. In this area, we surpassed our €100 million revenue target while extending the reach of SAP software. 

Cloud: We expanded our cloud portfolio in 2011, allowing us to provide customers with the benefits of simple and efficient software consumption. We achieved a key goal of enlisting more than 1,000 companies to choose our cloud-based SAP Business ByDesignSAP Business ByDesignAdaptable, on-demand business solution with broad support for cross-industry processes and preconfigured software that for financial management, customer relationship management, project management, procurement, and supply chain management. With feature p solutionsolutionSAP solutions enable a customer to meet a challenge or take advantage of an opportunity and are built or assembled by flexibly combining SAP applications and other SAP software. The solutions may include support for best business practices and be aided by. To complement our cloud offering, we announced the acquisition of SuccessFactors, the leading provider of cloud-based human capital management solutions and the largest cloud company by number of users. This acquisition will significantly accelerate our momentum to become a €2 billion cloud business by 2015. We also acquired Crossgate, which supports the creation of virtual business networks. 

Database and Technology: Our database and technology solutions began to redefine the market in 2011. Our technology solutions provide a cohesive platform on which our customers can accelerate and streamline their investments. This allows customers to extend their applications to reach more people and adopt new processes, devices, and consumption models. The SybaseSybaseSAP acquired Sybase in late 2010, broadening the SAP portfolio for enterprise mobility, introducing a complete mobile platform and mobile apps that enable customer access to data stored in SAP software and systems from anywhere and from any device. Sybase database portfolio, combined with the power and potential of our SAP HANASAP HANAFlexible, data-agnostic, in-memory appliance software that helps organizations analyze their business operations, using huge volumes of detailed transactional and analytic information from virtually any data source. The appliance software provides the fou in-memory technology platformtechnology platformThe technical foundation for a business-driven software architecture that increases the adaptability, flexibility, openness, and cost-efficiency of IT operations and enables organizations to become more agile in responding to change. See “SAP NetWeaver.” ..., gives us the opportunity to address the market for structured and unstructured data and become the fastest growing database company. 

Our SAP HANASAP HANAFlexible, data-agnostic, in-memory appliance software that helps organizations analyze their business operations, using huge volumes of detailed transactional and analytic information from virtually any data source. The appliance software provides the fou platform merits special notice. This groundbreaking technology enables non-disruptive innovation across all five of the above market categories. It often increases computing speeds by a factor of 1,000 or more, allowing our customers to work with massive amounts of data in real time. SAP HANASAP HANAFlexible, data-agnostic, in-memory appliance software that helps organizations analyze their business operations, using huge volumes of detailed transactional and analytic information from virtually any data source. The appliance software provides the fou will transform the market and allow us to renew our entire portfolio. It represents the future of SAP and we will continue to co-innovate with partners and customers to realize its full potential. SAP HANASAP HANAFlexible, data-agnostic, in-memory appliance software that helps organizations analyze their business operations, using huge volumes of detailed transactional and analytic information from virtually any data source. The appliance software provides the fou generated revenue of more than €160 million for the year – making it the fastest growing productproductDeliverable software unit that customers can view, install, and renew. in our history. 

Investing in Growth Markets

SAP expects above-average development in growth markets in the coming years. We continue to increase our investments in these markets. In China, for example, we will spend US$2 billion through 2015 on four key areas: Creating solutions, delivering these solutions by expanding our geographical footprint, building our support network, and nurturing the local IT ecosystemecosystemConstruct encompassing SAP and its customers and partners that extends the value SAP provides its customers. By bringing together community-based insight, innovative partner solutions, and industry-leading collaboration and co-innovation, it enables custo. We also invested in a new development lab near Moscow, Russia, providing us with a unique opportunity to be at the center of a local network of partners, customers, and start-ups in this important market. Further growth market investments are planned for 2012. 

Investing in Our People

Our innovative solutions and services would not be possible without our greatest asset – our employees. SAP continues to strengthen its focus on leadership and employee development. This commitment has led to a 9% increase in the Employee Engagement Index, which measures employee satisfaction and motivation. We also made strides toward our goal of having women in 25% of our leadership positions. At the end of 2011, 18.6% of leadership positions were held by women. SAP considers employee engagement and diversity an important aspect of being a sustainable company. In the area of sustainabilitysustainabilityFor SAP, sustainability is the ability to manage economic, social, and environmental risks and opportunities holistically for increased profitability. It contributes to our vision to make the world run better and improve peoples’ lives. SAP is committed t..., we are also proud to report that we increased carbon and energy efficiency for the fifth consecutive year.

Building Momentum

We have unprecedented momentum moving into 2012. Our customers value our focus on their needs and the non-disruptive breakthrough innovation we deliver. Organizations are shifting their IT spending to software from SAP because it helps them run better. We are well-positioned to exceed our goal of €20 billion in total revenue, achieve a 35% non-IFRS operating margin, and reach 1 billion people with beautiful software in 2015. 

We look forward to continuing working with our customers, industry partners, employees, and shareholders as we help the world run better and improve people’s lives. 

Best regards,

Overview