ASSURED 2011

Management Report

 

The SAP Group of Companies

Celebrating its 40th year in business in 2012, SAP is the world leader in enterprise applications in terms of software and software-related service revenue, and the world’s third-largest independent software manufacturer based on market capitalization. With more than 183,000 customers in over 130 countries, the SAP Group includes subsidiaries in every major country and employs more than 55,000 people.

Business Activity and Organizational Structure
Business Activity

Our core business is selling licenses for software solutions and related services to help companies of all sizes better manage industry-specific and line-of-business processes. SAP core solutionscore solutionsOfferings for standard business applications and technologies that provide customers with a stable, consistent solution suite that allows them be more efficient and agile, make decisions in real time, and create new value for their own customers. See “cor..., which cover standard business applications and technologies, provide customers with a stable, consistent 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 suite that allows them be more efficient and agile, make decisions in real time, and create new value for their own customers. SAP technologies – unwired by mobile apps, simplified by cloud solutions, and fueled by in-memory computingin-memory computingA major advance in information technology that creates a dramatic change in computing, analytics, and data storage. Combining advances in multicore processing with more affordable servers, in-memory computing allows information to be stored in the main me – are driving value and growth for customers, partners, and entire markets. 

To meet customers’ variety of preferences for delivery and adoption, SAP provides solutions from its portfolio on premiseon premiseTraditional model of software deployment where enterprises purchase software licenses and deploy applications in-house. , in the cloud, and on deviceon deviceAnytime, anywhere access to SAP applications and data from any type of wired or wireless device (desktop, laptop, mobile, tablets, sensors, and so on). deployments – all underpinned by 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. SAP solutions enable customers to orchestrate data and business processes across all operating environments.

Organizational Structure

Our legal corporate name is SAP AG. SAP is headquartered in Walldorf, Germany. Our company is structured along the following areas: 

  • Technology and Innovation Platform 
  • Products and Solutions 
  • Global Customer Operations 
  • Chief Operations Office 
  • Global Finance and Administration 
  • Human Resources 

SAP markets and distributes its products and services primarily through a worldwide network of local subsidiaries, which are licensed to distribute SAP products to customers in defined territories. Under their respective license agreements, the subsidiaries pass on to the licensor a certain percentage of the revenue generated by distributing the products. Distributorship agreements are in place with independent resellers in some countries. 

For a complete list of subsidiaries, associates, and other equity investments, see the Notes to the Consolidated Financial Statements section, Note (35)

Our management reporting breaks our activities down into four segments: ProductproductDeliverable software unit that customers can view, install, and renew. , Consulting, Training, and 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. For more information about our segments, see the Notes to the Consolidated Financial Statements section, Note (29).

Mission and Strategy
Market

With customers in more than 24 industries, from small businesses and midsize companies to large enterprises, in countries across the world, SAP has traditionally served a global market for enterprise software and services that is subject to the same trends that drive the world economy. Despite ongoing macro-economic uncertainty and volatility, numerous market forces are changing the business and technology landscape: 

To be successful in this climate, businesses must use technology and real-time analyticsanalyticsData analysis typically generated in the form of reports and charts which can be used for business insight and decision making. to better conduct business in real time, get closer to their customers, and innovate with more competitive and relevant products in each market and customer segment they serve.

Business and Technology Trends

Market dynamics require enterprises to evaluate their business models and opportunities for sustained growth and greater efficiency. SAP customer companies of all sizes continually evaluate, expanding into new geographies, approaches for engaging new customer segments in emerging markets and elsewhere, entering into adjacent vertical industries, and increasing networking at the enterprise level. Businesses and public sector organizations are also addressing customers’ and constituents’ needs for transparency and openness by empowering them with greater access to information. 

Three major technology trends – in-memory computingin-memory computingA major advance in information technology that creates a dramatic change in computing, analytics, and data storage. Combining advances in multicore processing with more affordable servers, in-memory computing allows information to be stored in the main me, enterprise mobility, and the cloud – have triggered change in the world of IT and SAP is playing a crucial role in accelerating that change. Those trends are changing not only the way enterprises adopt and deploy business technology, but also fundamentally the way that work is done. The pervasiveness of the cloud and mobile devices, together with the power of in-memory computingin-memory computingA major advance in information technology that creates a dramatic change in computing, analytics, and data storage. Combining advances in multicore processing with more affordable servers, in-memory computing allows information to be stored in the main me, allow people to connect and collaborate wherever and whenever they choose. At the same time, they can access and analyze large amounts of data in seconds. 

We strongly believe that the convergence of these technologies has the potential to create enormous business value and power new business models both in developed countries and emerging markets. We further believe this will change cultures – both within companies and externally among their customers, partners, and others across their business ecosystems. 

Connectivity of people and devices through mobile technology is increasing at an exponential rate. There are more than five billion mobile subscribers in the world today, and in the future, we will be able to connect hundreds of billions of objects – automobiles, household appliances, machines – in real time. This machine-to-machine connectivity or Internet of ThingsInternet of ThingsA fusion of the digital world and the physical world that brings together different concepts and technical components. Everyday objects and machines have sensors that can “communicate” with each other over the Internet, making new models possible for busi... will drive enormous business value and we are already seeing examples of this in smart utility grids and smart buildings. 

The explosion of Big DataBig DataThe large volume of data created by billions of connected devices and people generating a tremendous amount of information about their behavior, location, and activity. This availability of massive amounts of data requires companies to rethink technology in an increasingly connected world where people and devices exchange information continues at an unprecedented rate. Enterprise data volume is increasing by over 50% to 60% every year while IT budgets are growing at only 5%. Our customer businesses of all sizes and in all industries must increase their focus on analyzing volumes of data for new insights, greater customer intimacy, and competitive advantage. In this environment, in-memory computingin-memory computingA major advance in information technology that creates a dramatic change in computing, analytics, and data storage. Combining advances in multicore processing with more affordable servers, in-memory computing allows information to be stored in the main me delivers a dramatic change in computing, analyticsanalyticsData analysis typically generated in the form of reports and charts which can be used for business insight and decision making., and data storage. It leverages advances in multicore processing and more affordable servers, storing information in the main memory rather than in relational databases, to greatly accelerate processing times. It will fundamentally disrupt the traditional IT stack comprised of hardware, middleware, and software, where the disk-based relational database is the bottleneck. We believe that advances in in-memory computingin-memory computingA major advance in information technology that creates a dramatic change in computing, analytics, and data storage. Combining advances in multicore processing with more affordable servers, in-memory computing allows information to be stored in the main me will become the new backbone of next-generation business applications and enterprise technology. 

To increase efficiency and lower costs of ownership, enterprises are rapidly embracing cloud computingcloud computingGeneric term for flexible, IT-related services available through, or hosted on, the Internet for consumers and business, including storage, computing power, software development environments, and applications, combined with service delivery. Accessed as n and virtualization, as well as changes in data storage through in-memory computingin-memory computingA major advance in information technology that creates a dramatic change in computing, analytics, and data storage. Combining advances in multicore processing with more affordable servers, in-memory computing allows information to be stored in the main me, to rethink the way they invest in information technology. These advances are simplifying and removing layers from the traditional technology stack. SAP is helping drive change as customers reduce the amount they spend on hardware and services in favor of investment in software-based innovation. Increasingly, customers are looking to embrace social networking and collaboration technologies as a part of their cloud 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. We are developing a new category of cloud applications with a people-centric approach to help customers speed up decisions, strengthen customer relationships, and drive growth. 

Enterprise mobility continues to transform the way work is done and businesses are run. Smartphones already outsell PCs. By 2013, mobile devices will be the primary method of Internet access worldwide. A mobile workforce is seen as becoming more productive, since employees can now do their job any time, from any location, rather than being tethered to their office desktop. The pervasiveness of mobile technology, together with advances in the cloud and analyticsanalyticsData analysis typically generated in the form of reports and charts which can be used for business insight and decision making., empower workforces and consumers in new ways, regardless of location. This way, people can respond quickly and intelligently to timely information about events and their surroundings. 

With the continuing threat of climate change and resource price instability, businesses are also paying close attention to the strategic importance of managing 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....

Vision and Mission

Our vision is to help the world run better and improve people’s lives. We have a great opportunity to reshape the IT industry and transform business networks. In the next decade, we see a major demographic shift that will drive an exponential demand for natural resources. Businesses and governments will need a new category of sustainable solutions to cope up with this demand and provide high value services to their consumers and citizens. With our vast experience in resource management and our new technology innovations, we can power these new types of solutions. 

Our mission is to help every customer become a best-run business. We do this by delivering new technology innovations without disruptions: Enterprise mobility will transform consumption of IT; in-memory technology will simplify the IT stack and drive high value applications; and the cloud delivery of IT solutions will become mainstream. By leveraging our strong base in applications and analyticsanalyticsData analysis typically generated in the form of reports and charts which can be used for business insight and decision making. as well as new technology innovations, we can offer solutions that make our customers run better. 

In summary, we measure our success based on our customers’ success: When our customers win, we win. We are committed to optimizing the business value of our customers’ IT investments, lowering their total cost of ownership (TCO), and helping them innovate for the future. Our passion for growth and trusted partnerships with our customers, employees, shareholders, and members of our open 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 remains resolute. 

Strategy for Growth

Our strategy for growth seeks to increase SAP’s market leadership in existing and new market categories. The market trends in mobile, big dataBig DataThe large volume of data created by billions of connected devices and people generating a tremendous amount of information about their behavior, location, and activity. This availability of massive amounts of data requires companies to rethink technology , cloud computingcloud computingGeneric term for flexible, IT-related services available through, or hosted on, the Internet for consumers and business, including storage, computing power, software development environments, and applications, combined with service delivery. Accessed as n, and social networking present a unique opportunity for SAP to deliver expanded business value through a concerted innovation strategy focused on these market trends that delivers these innovations without disruption to our customers’ business and further leverages their existing investments in SAP software. To that end, as the information technology industry undergoes a structural shift away from investments in hardware toward increased investments in new software-based innovation, particularly in the area of cloud, mobile, and in-memory technology, SAP wants to position itself at the forefront of accelerating that change. 

As a result, compared to 2010, we are doubling our addressable market for 2015 by focusing on five market categories:

SAP's Five Market Categories

Our groundbreaking 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 allows customers to take advantage of in-memory computingin-memory computingA major advance in information technology that creates a dramatic change in computing, analytics, and data storage. Combining advances in multicore processing with more affordable servers, in-memory computing allows information to be stored in the main me across all of these market categories. Installed on top of an existing infrastructure and working with available data, they can use it to query multiple types of data sources in real time, at speeds and volumes like never before. As a result, customers gain immediate business insight to transform organizations and achieve fundamental performance improvement compared to existing systems in their IT landscape. 

SAP’s momentum in the five market categories will be fueled by our strategy of innovation without disruption, co-innovation with our 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, and ability to orchestrate technology consistently across the enterprise.

Accelerate Innovation Without Disruption

While we focus on innovations in our five market categories, our strategy is to deliver innovation with minimum disruption. We will ensure this by reducing TCO for customers adopting our innovations in these areas through rapid-deployment solutions that draw on our years of experience implementing solutions across more than 24 industries and application virtualization. SAP’s commitment to accelerated innovation cycles and extended 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. for 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 software offers consistency, predictability, and innovation without disruption to customers’ IT environments. SAP stands out among vendors in its ability to enable enterprises to become more agile and efficient while freeing up resources to innovate, better connect with customers, and grow in today’s global market. 

Expand Our Ecosystem

Through our open 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 offer customers maximum choice, value, and the best possible technology through the power of co-innovation from SAP and our partners. SAP continues to invest in our broad partner 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 to drive development and delivery of innovative software solutions that address industry-specific and local market needs. We will offer development toolkits on our solutions that will allow our partners to extend our current solutions as well as build new solutions.

Competition

SAP continues to be the world leader in applications, analyticsanalyticsData analysis typically generated in the form of reports and charts which can be used for business insight and decision making., and mobile, and aims for leadership in the cloud and database and technology market categories. Our primary competitors in applications are IBM, Oracle, and Microsoft. Compared with SAP, those companies derive a much higher portion of their revenue from other segments of the IT market, such as hardware (Oracle, IBM); operating systems, and desktop applications (Microsoft); and IT services (IBM). Key competitors in analyticsanalyticsData analysis typically generated in the form of reports and charts which can be used for business insight and decision making. include IBM (Cognos), SAS Institute, and Oracle (Hyperion). The mobile market is still highly fragmented. Competitors with offerings that overlap with ours include Antenna and Spring Wireless (an SAP Ventures portfolio company). In the cloud market, we face line-of-business players such as Salesforce.com, Workday, and NetSuite. Oracle has also become a competitor in this market through its acquisition of RightNow and its planned acquisition of Taleo. Principal competitors in the database and technology business include IBM, Microsoft, and Oracle. Our offerings also compete with those of specialized vendors in various local markets and subsegments. 

Sustainability

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... is core to the overall business strategy at SAP and contributes to our vision to make the world run better and thus improve peoples’ lives. We approach 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... as the holistic management of social, environmental, and economic risks and opportunities for increased near-term and long-term profitability – and as a responsibility to our stakeholders. We are committed to fully integrating 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... into our strategy and business model and in this way we pursue a corporate strategy that is sustainable rather than a stand-alone 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... strategy. 

SAP software, including the SAP ERPSAP ERPThe SAP ERP application is designed to optimize business and IT processes by reducing IT complexity, increasing adaptability, and delivering more IT value at a lower cost than traditional ERP solutions. It can support mission-critical, end-to-end business application and other 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 applications, has helped organizations become more profitable, resource-efficient, and accountable over the past 40 years. 

These applications can also help solve difficult 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... business problems such as dynamic energy management. Our solutions are helping provide greater levels of collaboration for 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... among stakeholders and greater access to enterprise-level computing for many of those previously excluded from market participation. 

In addition, SAP provides a dedicated line of solutions for 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... with the essential power to integrate at the center. 

But to deliver our vision, we recognize there are important associated responsibilities and dependencies. The most relevant of these for 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... efforts include: 

Financial Management Strategy

The primary aim of our financial management is to maintain liquidity in the SAP Group at a level that is adequate to meet our obligations at all times. Finance may be required to proactively sustain liquidity at that level. It may also be necessary to enter into financing transactions when additional funds are required that cannot be wholly sourced from free cash flow (for example, to finance large acquisitions). 

Overview