COMPANY PROFILE

SAP SE

REFERENCE CODE: BAD259E2-8800-4E53-8366-80B825AB36A2

PUBLICATION DATE: 12 Dec 2014
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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.
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 16,815.0

(EUR Mn)
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.
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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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 companys partners operate independently of SAP and complement SAPs 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 companys partners collectively had more than 380,000 skilled resources in SAP
solutions and technology.
The companys 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 portfolio
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 drivers
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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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 services.
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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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 corporate 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 enterprise 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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The company is keen to take advantage of this growth opportunity. SAPs 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 companys 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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email articles for individual use.

Copyright of SAP SE SWOT Analysis is the property of MarketLine, a Datamonitor business

and its content may not be copied or emailed to multiple sites or posted to a listserv without
the copyright holder's express written permission. However, users may print, download, or
email articles for individual use.