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SAP & THE EVOLVING ERP SOFTWARE INDUSTRY

Group Members
Aneesh Singla Surbhi Sharma Vikas Hooda Isshu Mittal Siddhartha Gupta Arumka Jolly

History of SAP
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On April 1, 1972 five former IBM employees founded SAP in Mannheim, Germany. Re named in 1977 , Before 1977 : Systems Analysis and Program Development Now Systems, Processing Applications and Products in Data

Their vision was to develop and market standard enterprise software which would integrate all business processes.

From a start-up software Vendor To Global Market Leader


 Over the course of twenty-five years, their vision has transformed SAP from a small regional enterprise into a world-class international company.  Today, the SAP Group is the global market leader in enterprise resource planning software, and has subsidiaries, affiliates and branch offices in nearly every industrial nation in the world.  Important milestones in the company's corporate history -- The opening of the company's headquarters in Walldorf in 1977. -- Its conversion into a publicly-held corporation in 1988 whose shares are listed on several stock markets.

Product Profile
   The company's best known products are its Enterprise resource planning application (SAP ERP), SAP Business Objects software, and Most recently, Sybase mobile products and in-memory computing appliance SAP HANA.

Question 1:
What was the reason for SAP s success in its early years, especially during 1980s??

Goal had been from the beginning to create global industry standard for ERP by providing best business applications software infrastructure. They focus on influential niche of companies.  As SAP focused its R/1 software on the largest multinational companies with revenues of atleast $2.5 bn. In its first years, SAP not only focused on developing ERP software but also used its own internal consultants to install physically on-site at its customer base quickly.

Determined to increase its customer base quickly but later switched strategies in 1980s Decided to focus primarily  On the development of its ERP software and  To outsource to external consultants the implementation services needed to install and service its software on-site in a particular company. Formed series of strategic alliances with major global consulting companies- IBM, Accenture, Cap Gemini to install its R/1 system in its growing base of global customers.

SAP s outsourcing consulting strategy allowed them to penetrate global markets quickly and eliminated huge capital investment needed to provide this service on global basis but this decreased revenue earnings. Second generation ERP software R/2 in 1981  Contained many more value chain/business process software modules.  Linked its ERP software to databases and communication system.  Integrated all of an enterprise's functions, such as accounting, manufacturing processes, supply chain logistics and human resources.

SAP s culture was built on values and norms that emphasized technical innovation and development of leading edge ERP software was the key success factor in the industry. By 1988, SAP was spending more than 27% of gross sales on R&D because this gave them competitive advantage. Products was considered superior to other ERP software being developed by Peoplesoft, S.D Edwards and Oracle. Gained competitive advantage because they were offering broad, standardised, state-of-the-art solution to many companies business process problems.

R/3 solution was introduced in 1992. It offered real processes. time integration for over 80% of a company s

It was composed of modules : Production Planning Material Management Financial Accounting,

Asset management HR management Project System Sales Distribution

Could operate in multiple languages. It was open architecturally means could operate with whatever kind of computer hardware or software. It was upto 20% customised to work with company existing operating methods. SAP R/3 outperformed its competitors products in technical sense and allowed them to charge premium price from customers. Strategy to make its current customers to switch to its new products and then rapidly build its customer base. This strategy was also vital for its future success.

Reasons
It was not only the success of R/3 that turned the small Walldorf software company into one of the world s largest. This development dates back to the late 1970s. Its first phase, which includes the foundation story already covered, is best described as SAP s buildup and stabilization up to the early 1980s.

was followed by a period of expansion in which the company secured both a prominent position on the German market and a global starting point that was technologically and economically advantageous.

The subsequent third phase of rapid, explosive growth following the release of SAP R/3 informs our current perception of SAP The end of this initial phase was marked by extensive changes in economics, technology, and personnel

Experiences with mainframe computer technology, coupled with business process knowledge gained in close collaboration with customers during implementations, were key elements of the new product.

The increasing success of SAP R/2, released in 1981 In 1982, a cost-accounting component(RK) was added.

SAP S internationalization

On the basis of this success, SAP was confident and aware of its advantages as it faced competition from companies expanding from the US to Europe at the end of the 1980s. 5

Building partnerships
Having discovered IT services as a new growth area in the mid-1980s, these groups appreciated the advantages of using SAP s software, notably the ability to adjust the software for local implementation in many countries without loss of functionality. As a result of this collaboration which provided both a new distribution channel and partners for implementations SAP experienced another rise in growth, which led to its debut on the stock market.

consulting companies to open a training center in 1988, which also grew rapidly and went on to provide SAP system training to thousands of people, so called SAP consultants, when the R/3-boom took off.

Changing the hardware platform


The first product reflecting this strategic shift was the new SAP R/3 system. In additional to technological changes, SAP decided to go public in 1987 1988. SAP had grown rapidly from 1980 to 1987, rising on the Lu nendonk List from 16th in 1980 to 7th in 1984 based on an increase in sales from J7 million to J24 million. By 1987, the company and its J76 million in sales were right behindmarket leader Software AG

As of 1987, 60 of the 100 largest German companies were using SAP software; SAP had more than 1,000 customers worldwide by 1988. 60 These figures clearly show the beginnings of SAP s success in the mid-1980s, when SAP R/2 was still its focus

In addition to user groups, consulting and auditing organizations acted as intermediaries between SAP and other companies. These relationships can be described as SAP s fourth strategy. One purpose behind these relationships involved customers serving as partners that provided on-site consulting, supplements and adjustments to integrate the SAP software into the customers existing software landscape, bearing part of the financial risk in the process. T

Worthy of first mention is the company s relationship with IBM. This was not only SAP s original and thus longest-standing strategy; it also showed the two-sided character of such solutions.

SAP s second strategy, also based in its foundational period, capitalized on customer relationships, particularly those involving pilot customers Customers also played a major part in SAP s third strategy: internationalization. Customers developed the first software versions for use in other countries either on their own or with SAP, thereby providing the crucial impetus

In addition to aspects I ve described, other company-internal determinants such as financial and organizational structure played a prominent role in SAP s success for instance, the decision to go public rather than obtain a major external investor and the successful integration of many new personnel in a short period of time.

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