COMPANY PROFILE
SAP SE
REFERENCE CODE: BAD259E2-8800-4E53-8366-80B825AB36A2 PUBLICATION DATE: 12 Dec 2014 www.marketline.com COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO TO BE PHOTOCOPIED OR DISTRIBUTED.
SAP SE TABLE OF CONTENTS
TABLE OF CONTENTS Company Overview..............................................................................................3 Key Facts...............................................................................................................3 SWOT Analysis.....................................................................................................4
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SAP SE Company Overview
COMPANY OVERVIEW SAP SE (SAP or the company ) is engaged in selling licenses for enterprise application software products, solutions, and cloud subscriptions. In addition, the company also offers support, consulting, development, training, and other services for its software solutions. SAP operates in the Americas, Europe, the Middle East and Africa (EMEA) and Asia Pacific Japan (APJ). It is headquartered in Walldorf, Germany and employed 66,572 people as of December 31, 2013. “
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The company recorded revenues of E16,815 million ($22,330.3 million) during the financial year ended December 2013 (FY2013), an increase of 3.6% over FY2012. The operating profit of the company was E4,479 million ($5,948.1 million) in FY2013, an increase of 10.8% over FY2012. The net profit was E3,326 million ($4,416.9 million) in FY2013, an increase of 18.7% over FY2012.
KEY FACTS Head Office
SAP SE Dietmar-Hopp-Allee 16 69190 Walldorf DEU
Phone
49 6227 7 47474
Fax
49 6227 7 57575
Web Address
http://www.sap.com
Revenue / turnover (EUR Mn)
16,815.0
Financial Year End
December
Employees
66,572
XETRA Ticker
SAP
New York Ticker
SAP
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SAP SE SWOT Analysis
SWOT ANALYSIS SAP SE (SAP or the company ) is engaged in selling licenses for enterprise application software products, solutions, and cloud subscriptions. SAP's diversified presence across geographies diversifies its business risks. Furthermore, the company is well positioned to tap into growth opportunities offered across the regions. However, intense competition may lead to pricing pressures thereby adversely impacting the financial performance and market share of the company. “
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Strengths
Weaknesses
Diversified end markets and geographic reach Extensive partner network Robust research and development capabilities Strong financial position
Lack of scale and product diversification
Opportunities
Threats
Increasing adoption of cloud computing Growing demand for enterprise mobility Big Data presents growth opportunity
Intense competition Risk from exchange rate fluctuations
Strengths
Diversified end markets and geographic reach The company has developed deep expertise within specific industry groups. The company follows a vertical strategy and offers around 25 industry-specific solutions, which are categorized into six groups. In FY2013, the energy and natural resources group generated approximately 24.2% of SAP' revenues, followed by consumer (22.5%); discrete manufacturing (17.8%); services (15.8%); public services (10.1%); and financial services (9.7%). By catering to diversified industries, the company reduces vulnerability to industry specific risks and also enhances the revenue generation opportunities for the company. In addition, SAP has diversified geographic presence with operations in more than 180 countries. For FY2013, SAP derived approximately 27.7% of its revenues from the US; Germany (14.9%); Japan (3.7%); rest of EMEA (32%); rest of APJ (11.5%); and rest of Americas (10.1%). The company's revenue growth from all the regions has been fairly balanced and all regions except Japan registered a growth on a year on year basis in FY2013. SAP's diversified presence across geographies diversifies
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SAP SE
SWOT Analysis
its business risks. Furthermore, the company is well positioned to tap into growth opportunities offered across the regions. Extensive partner network SAP has an extensive partner network, comprising of approximately 11,500 partners as of FY2013. The company s partners operate independently of SAP and complement SAP s business by selling software, by developing solutions that complement SAP software, and by providing implementation and other services. SAP partners help companies of all sizes identify, purchase, and deploy the ideal solutions to address their business needs. SAP value-added resellers (VARs) and multitier distribution channels offer local market and industry expertise that addresses specific market needs. SAP also engages with the partner community in the development of new solutions, and works with partners on new product initiatives. SAP has strong partnerships with a broad network of IT professional services firms that provide consulting, system integration, hosting, education, and more. As of FY2013, the company s partners collectively had more than 380,000 skilled resources in SAP solutions and technology. ’
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The company s strong partner network provides significant and sustainable value to the company in expanding its revenues and geographical spread. It also acts as a competitive advantage over its peers. ’
Robust research and development capabilities The company has significant focus on research and development (R&D) activities which enables it to launch new and innovative products. SAP' research is directed towards development of new products and solutions and towards building technological capabilities in the enterprise application software markets. The company is focused on developing innovative technologies and is well-positioned to participate in future development programs. In addition, it owns a strong por tfolio of patents and has several pending patent applications. The company holds 5,500 validated patents worldwide and of these, more than 700 were granted and validated in FY2013. In FY2013, SAP's R&D expenditure was E2,282 million ($3,030.5 million), representing approximately 13.6% of its revenues. SAP' strong focus on R&D allowed it to develop new solutions as well as enhance the existing products. For instance, in February 2014, the company developed a technology infrastructure for in-vehicle mobility services in collaboration with BMW Group Research and Technology.The research prototype is based on the SAP HANA Cloud Platform and will provide personalized services to dri vers based on their location and route. This collaboration brings SAP one step closer toward making its vision of the connected car a reality. Also, in March 2014, SAP launched a rapid-deployment solution that enables businesses embracing bring-your-own-device (BYOD) policies to offer secure mobile devices, content and apps. The company's robust R&D capabilities enable it to uphold the technological leadership in most of its product segments. It has also enabled SAP to develop innovative products, leading to strong sales. Strong financial position
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SAP SE SWOT Analysis
The company reported strong financials in FY2013. For instance, SAP recorded revenues of E16,815 million ($22,330.3 million) during FY2013, an increase of 3.6% over FY2012. The operating profit of the company was E4,479 million ($5,948.1 million) in FY2013, an increase of 10.8% over FY2012. The net profit was E3,326 million ($4,416.9 million) in FY2013, an increase of 18.7% over FY2012. As a result, the operating margin and net margin increased from 24.9% and 17.3% in FY2012 to 26.6% and 19.8%, respectively in FY2013. The improved margins are an indicator to measure the profitability of the company, its pricing strategies and its control over the costs. Improved profit margins indicate the management's efficiency is investing in profitable ventures. Strong financials enhances its shareholder's value and allows the company to fuel its expansion plans.
Weaknesses
Lack of scale and product diversification The company lacks the scale and product diversification to compete with other major players. Some of its competitors such as Microsoft and Oracle have greater financial strength and diversified product portfolio. Microsoft reported revenues of $77,849 million during the year ended June 2013, while Oracle recorded revenues of $37,180 million during the year ending May 2013. Comparatively, SAP reported revenues of E16,815 million ($22,330.3 million) in FY2013. In addition, the company lacks product diversification when compared to its competitors. SAP concentrates on the business software segment, while competitors also address other segments of the IT market, such as database management applications, operating systems, desktop applications, and servers. Its major competitor, Microsoft, is diversified into networking, operating systems, hardware and online business ser vices. Oracle provides database and middleware software and applications software for enterprises. SAP's relative lack of scale and product diversification limits its ability to compete effectively.
Opportunities
Increasing adoption of cloud computing The worldwide demand for cloud computing services is expected to record strong growth in the coming years. Cloud computing is a computing infrastructure model, which enables delivery of software-as-a-service (SaaS). The appeal of cloud computing has been increasing as it enables companies to reduce expenses such as upfront royalty or licensing payments, investment in hardware infrastructure and other operating expenses. Consequently, the demand for cloud computing services has been increasing and is expected to grow rapidly and cross $241 billion by 2020. In addition, public cloud services market is forecast to grow at a CAGR of 23.5% during 2013-17. The market is expected to be driven by smartphones, tablets and high-speed internet access demand. SAP has increased its focus on cloud computing in the recent times. The company provides the complete set of cloud offerings, including, cloud platform, cloud services, cloud applications, and business network services. To strengthen its presence in the rapidly growing market for cloud
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SWOT Analysis
computing, the company also made a number of significant acquisitions, including Ariba and SuccessFactors. Moreover, in November 2013, SAP and China Telecom entered into a strategic partnership in cloud computing pursuant to which the SAP Cloud portfolio will be offered to small and large organizations in China by China Datacom, a joint venture between SAP and China Communication Services. Further in January 2014, Japanese multinational NEC entered into an OEM agreement with SAP to integrate the SAP Business ByDesign solution with its global cloud-based ERP services. Further in March 2014, SAP and Accenture decided to create a new business group focused on jointly developing and delivering new industry-specific solutions based on cloud and other digital technologies. SAP's increasing presence in the expanding cloud computing domain and the rapidly growing end market will provide the company with the steady revenues and increasing customer base. Growing demand for enterprise mobility The market for enterprise mobility solutions has been growing at a rapid pace. Increasing mobile worker population, emergence of sophisticated mobile devices such as tablets and smartphones and introduction of several business applications is expected to drive the market for enterprise mobility over the next few years. According to industry sources, the market for enterprise mobility solutions is expected to exceed approximately $174 billion by 2017. SAP has increased its focus on enterprise mobility solutions in the recent times. For instance, in October 2013, the company collaborated with Samsung to provide mobile security and management solutions for Samsung KNOX, a solution that addresses the mobile security needs of enterprise IT. Similarly, in March 2013, SAP launched a rapid-deployment solution that enables businesses embracing bring-your-own-device (BYOD) policies to offer secure mobile devices, content and apps. The SAP Mobile Secure portfolio provides compliant access to cor porate data, and with options to deploy on premise, in the cloud or in a hybrid environment, as per the customers needs.The positive outlook for the enterprise mobility solutions and the company's increased focus on this business will enable it to enhance its customer base and market share in the coming years. ’
Big Data presents growth opportunity Big Data, which is a primary contributor to the pace of overall data growth, refers to the large repositories of corporate and external data, including unstructured information created by new applications, including medical, entertainment, energy and geophysical, social media and other web repositories. It also refers to the new analytics and other technologies that are available to help people do things with the significant amount of enterpr ise and external data. According to industry estimates, the total amount of digital information is expected to reach 40 zettabytes by 2020. Also, the global Big Data market is expected to reach $48.3 billion by 2018, growing at a CAGR of more than 40% for the 2012-18 periods. Moreover it is also estimated that, 70% of enterprise organizations would have either deployed or are planning to deploy Big Data-related projects and programs in 2014.
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SWOT Analysis
The company is keen to take advantage of this growth opportunity. SAP s technology strategy centers on SAP HANA as the real-time in-memory computing platform for analytics and applications. SAP HANA enables organizations to analyze business operations based on a large volume and variety of detailed data in real time. The company has established strategic partnerships with leading companies to enhance its Big Data offerings. For instance, in October 2013, SAP entered into a strategic partnership with business analytics software company SAS to advance in-memory data analysis capabilities for businesses across industries. As part of the partnership, the companies intend to create a joint technology and product roadmap designed to leverage the SAP HANA platform and SAS analytics capabilities. In the same month, the company and big data analysis solutions provider Vendavo expanded their development road map and partnership based on the SAP HANA platform aimed at providing customers with new real-time profit optimization solutions. Further, in February 2014, the company expanded its relationship with DigitalRoute, a provider of new approaches to Big Data management to enhance the customer experience of telecommunications companies. Moreover, the company entered into an agreement to acquire KXEN, a provider of predictive analytics technology, in September 2013. The combination of KXEN with SAP, along with the SAP HANA platform is intended to help companies harness the Big Data opportunities. ’
The company s strong presence, increased focus, and the positive outlook for the end market provide it with an opportunity to gain more customers and increase its revenues in future. ’
Threats
Intense competition The company operates in a highly competitive and rapidly evolving software industry. SAP's primary competitors in applications include IBM, Oracle, and Microsoft. The company's key competitors in analytics include IBM (Cognos), SAS Institute, and Oracle (Hyperion). The mobile market is still highly fragmented. Competitors with offerings that overlap with SAP's include Pegasystems and Spring Mobile Solutions. Similarly, in the cloud market, the company faces line-of-business players such as Salesforce.com, Workday, and NetSuite. In addition, SAP's principal competitors in the database and technology business include IBM, Microsoft, and Oracle. Its offerings also compete with those of specialized vendors in various local markets and sub-segments. Intense competition may lead to pricing pressures thereby adversely impacting the financial performance and market share of the company. Risk from exchange rate fluctuations SAP operates globally and is exposed to foreign exchange risk arising from various currencies. The magnitude of foreign exchange exposures changes over time as a function of the company's presence in different markets and the prevalent currencies used for transactions in those markets. SAP's non-Euro based sales gives rise to substantial foreign exchange exposure. In general, depreciation of another currency relative to the Euro will have a negative impact on the company's sales and
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SWOT Analysis
operating profit. Approximately 71% and 72% of SAP's total revenue in FY2013 and FY2012, respectively, was attributable to operations in non-Euro participating countries. In addition, foreign currency denominated assets and liabilities together with foreign currency denominated cash flows from highly probable or probable purchases and sales contribute to foreign exchange exposure. These transaction exposures are managed against various local currencies because of the company's substantial production and sales outside the Euro zone. Since the company has subsidiaries outside the Euro zone, the Euro-denominated value of the shareholders' equity of SAP is also exposed to fluctuations in exchange rates. Exchange rate fluctuations from time to time may significantly weaken the company's results of operations and financial condition.
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