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Information Technology is at the very core of major organizations around the world, and its importance is beyond question. Market forces and customer expectations continually pressure organizations to improve the performance of their systems. While many software companies have looked at areas of business and have developments systems to support those areas, SAP has looked toward the whole business. It offers a unique system that supports nearly all areas of business on a global scale. The SAP system consists of a number of fully integrated modules that cover virtually every aspect of business management.
Eliminates the problem of synchronizing changes between multiple systems - consolidation of finance, marketing and sales, human resource, and manufacturing applications
Permits control of business processes that cross functional boundaries
Provides top-down view of the enterprise (no "islands of information"), real time information is available to management anywhere, anytime to make proper decisions.
Reduces the risk of loss of sensitive data by consolidating multiple permissions and security models into a single structure.
Shortens production lead time and delivery time
Facilitates business learning, empowering, and building common vision
SAP was founded in 1972 and has grown to become the world's fifth largest software company.SAP is the name of the company as well as the computer system or what we call software. Its core business is selling licenses for software solutions and related services. As the world's leading provider of business software, SAP delivers products and services that help accelerate business innovation for its customers. SAP lists more than 95,000 customers in more than 120 countries, and 74% of the Fortune 500 companies run SAP software - from distinct solutions addressing the needs of small businesses and midsize companies to suite offerings for global organizations. SAP recognizes that it can leverage its huge customer base and has great opportunities to sell new products, add-on business applications, and additional user licenses.
SAP plans to realize its potential through:
Organic Growth through growing its product portfolio. SAP spent â‚¬1.6 billion on R&D in 2009.
Co-Innovation by expanding its partner ecosystem to support solutions development and enterprise services based on the business process platform, and leverage sales forces to accelerate innovation.
Strategic Acquisitions to add to its broad solution offerings within and across industries by gaining specific technologies and capabilities to meet the new demands in the market
FIG: Competitor Map
What are the resources that SAP have?
Strong R&D: SAP has a network of 13 research centres worldwide. The group significantly contributes to SAP's product portfolio and extends its leading position in the market by identifying and shaping emerging IT trends and generating breakthrough technologies through applied research. In contrast to SAP's product groups and development labs that work on new functions and releases, the researchers explore opportunities that haven't yet been developed into products
Technical Expertise: The SAP Labs Network leverages SAP's rich diversity and technical and business expertise to deliver the best software solutions and services in the IT industry. Located in high-tech centres across the globe, the SAP Labs Network helps SAP engage the local ecosystems and enable co-innovation.
Operational Sustainability: Over the past 10 years, SAP has been recognized by the Dow Jones Sustainability Index for upholding ethical, environmental, social, and governance values in our products and services. For the last three years, the index has named SAP as the leader in the software sector. SAP is committed to improving its own operations to be more sustainable, and to delivering customer solutions to improve sustainability on a grand scale.
Rich Diversity and Cultural Wealth: In an era of mobility and globalization, we attract an increasingly international workforce according to the varying demands of local and regional labor markets and the qualifications of available applicants. For SAP, this diverse workforce is not only a reality, but also a fundamental driver of our business results. SAP recognizes that their diverse human capital is the essence of their success. SAP is committed to our open corporate culture and embrace diversity as a force for innovation. Through its numerous policies, it seeks to be open to the different conditions that apply wherever it is present in the world, and to leverage the power of our diverse employee base for the benefit of the company.
Value proposition: The SAP value proposition offers tangible benefits, enables growth, and reduces total cost of ownership. SAP products deliver value to companies of all sizes through an industry-specific, building-block approach that preserves a company's initial IT investment. SAP products automate processes that promise Strategic alignment, Flexible processes & Predictable performance that lead to efficient execution, Confident decisions & eliminate all the risks associated with innovation and growth. Its family of integrated and scalable products continue to deliver value as the company grows.
Customer Base & intimacy: Customers help to develop the solutions, providing their feedback to the company about what things can be modified or improved
Patents: In 1999 did SAP start with its own patenting activities. This was in reaction to litigation threats in the USA. A new patent department was set up and SAP had obtained four software patents by April 2000. SAP has declared in the German Parliament that SAP needs software patents not as an innovation incentive but only as a weapon against other patents which have created problems for SAP in the US. At present almost 50+ patent applications have been filed by SAP.
Brand: SAP ranked #27 in the Interbrand's 11th annual ranking of the "Best Global Brands", that places SAP in the league of established brands like Apple, Ikea, Pepsi & Nike. the true test of a brand is how well its leveraged against its business objectives. In 2009, the financial results have been impressive across board and it has maintained its position as a market leader worldwide.
Strong Leadership: The exemplary leadership of SAP executive is seen in the SAP transformation early 2000. Then SAP was relegated to the back pages, brushed aside by newer movers and shakers of e-business. But with the visionary leadership of a small group of executives lead by Marty Homlish transformed SAP into a rock-solid performer that continues to date. Transforming SAP hasn't been easy, though. The SAP's top executives wreaked major changes throughout the company, from radically altering the marketing strategy to redeploying field sales resources.
Financial Stability: A review of the financial figures reinforce the financial stability of the company -
Product Range & Differentiation - Its products are clearly differentiated from those of its competitors, offering the possibility of total customization of the product. Most of the other companies offer a basic product that can be customized once it is acquired. In the case of SAP, customer can decide which applications wants to include on the software they are going to buy and which not, thus they don't buy a basic product, they buy their own product. This makes the customer life cycle to be very long (around 20 years) and commitment to the company.
FIG: The spectrum of the SAP Product Portfolio
Developer network: SAP Developer Network (SDN) community offers nearly 2 million members in more than 200 countries the chance to trade experience and insights, pursue business opportunities, and learn from each other. It is the biggest innovation community associated with SAP. SDN includes discussion forums, blogs, wikis, software and tool downloads, and e-learning. A wealth of technical assets attracts more than half a million visitors to SDN every month.
Employees: It's the employees who enable SAP to help enterprises of all sizes in all industries increase efficiency, improve business processes with SAP solutions and services, and become best-run businesses. With their diverse expertise, SAP's 18,000+ strong highly qualified employees with different cultural backgrounds use other resources in an intelligent and efficient way, to generate a significant and lasting competitive advantage for SAP.
Best in Class HR Practices: SAP invests in learning and development of its employees. The Career Success Centres are effective tools in place for career planning and provide guidance, tools, and support information to help its people succeed in their roles. The Skills On-Demand library provides employees with access to approximately 13,000 e-learning courses, books, simulations, and other learning materials that can help employees expand their skill sets and drive their career development. HR processes for talent management support our innovation and performance strategy. In multiple employee surveys it is recognised as a Great Place to Work and a Preferred Employer.
Trusted, targeted Partnerships: Emerging business challenges require holistic thinking. SAP forges partnerships and shared projects that we believe will help shape our future, securing and enhancing global relationships.SAP partners operate in an unmatched collaborative environment; together they overcome the traditional barriers to growth and profitability, like the need to move faster than the competition and the uncertainty surrounding change and innovation, through relevant industry relationships and together accomplish more. Partners work together to seek high-growth opportunities, reduce the cost of development and drive new sources of innovation for the company, and for their customers. Partner solutions become part of the "whole" solution for customers where shared interests and goals are realized and new opportunities are revealed. Some of the partners of SAP are Atos Origin, Cap Gemini, IBM, HP and Wipro.
Unique communities of innovation: SAP Community Network distinguishes SAP as the leader in coordinating and harnessing the collective power of developers, partners, customers, business process experts and others integral to the shared success of each community. Customers co-innovate and partners collaborate to achieve results that test cost, time, and expertise limitations in everyday business. While unified by shared business goals, communities are fluid enough to ensure that information is dynamic, agile, and accessible.
Flexible business process platforms for collaboration: A common approach and language enables the SAP ecosystem to create valuable service definitions, co-innovate across industries, and enable participation and leadership in industry standards groups.
SAP offer a comprehensive and tiered portfolio of support services for application's entire life cycle - Enterprise, Standard & safeguard services.
Business Process Experts
Industry Value Network Program
SAP Global Delivery
integrator partnerships to drive adoption of SAP Business Suite and deliver certified consultants to the marketplace
The IT consulting and outsourcing company as global services partner
Sales Force - 9513
The Product segment- engaged in marketing and
Partners as contributors to the technology -Intel and Adobe
Partners providing hardware- Dell, Fujitsu, IBM, and HP
Value Chain Framework
SAP runs SAP
General Finance functions of Accounting & Financing
Employee Strength: 48,500; Preferred Employer Awards; Payroll Processing, Employee Engagement, Sustenance Initiatives, Compensation, Career Success Centres, Talent Management
NEED FOR A NEW STRATEGY
SAP was the market leader in ERP market with a 76% market share. But changes in the environment created a situation in which SAP had to change the way it worked. The following factors in one way or the other contributed to SAP's decision to adopt a new strategy:
Declining Popularity of ERP
A combination of a lot of factors contributed to the downfall of ERP systems. ERP systems were designed to integrate only the internal processes of the organization and did not provide for links with external suppliers, customers and other companies, which was essential in the new environment. The advent of the internet meant that everybody had access to applications and the licensing based pricing model was proving to be very costly. These shortcomings of ERP systems led to customers purchasing different components from vendors and then trying to link them to the ERP system. The need was to clearly move away from being a mere software provider to an infrastructure and solution provider. SAP did catch up in 1999, when it launched the web based version of mySAP called my SAP.com.
The Dotcom crash of the early 2000s had an impact on the revenues and net income of SAP also. To combat the situation, SAP improved its product offerings by integrating SAP Portals and SAP Markets into mySAP. Many newly formed software companies disappeared after the crash and companies once again turned to established players like SAP for their technological needs. But clearly growth had slowed down.
By 2003, CIOs were willing to increase their IT budgets but this time they wanted greater returns on their investments. So this growth in IT budgets was expected to be modest. Also, at this time, the industry was in the middle of an eight year long period of "technology digestion". The IT industry had witnessed three periods of growth in which companies had made huge investments in technology without witnessing matching returns. The "technology digestion" period was the time to align organizational structures, systems and processes to the new technology and hence this period was characterized by low IT spending.
Changes in Software Industry
In the short term, the growth in this industry was expected to be primarily driven by systems software, especially since data storage requirements had seen a drastic increase. Also, companies had had a bad experience while trying to implement enterprise software packages like ERP and CRM. These systems were built on proprietary code and this led to incompatibility issues between applications developed by different vendors. Also, integrating them with the existing systems in the organization was a complex process. Dell abandoned its SAP implementation effort in 1996 after trying to implement SAP R/3 system for 2 years.He felt that SAP was not a good fit and would kill innovation at Dell. Nestle too had faced its share of problems with SAP implementation since its employees were not ready to move to the system and their buy in was not taken. Emergence of Service Oriented Architecture (SOA) and associated technologies like Web Services meant that these vendors would now have to be solution providers and not product vendors. This also led to introduction of the concept of software as a service.
Changes in Customer Requirements
Due to globalization and technological improvements customers were moving to more agile business models and they demanded speed. The rate at which technology changed meant customers wanted to upgrade their software more quickly as compared to the past. But they did not want to be bound to tight schedules and looked for greater freedom and choice.
SAP'S NEW STRATEGIC POSITION
Expansion Into Newer areas
SAP was the market leader in the ERP segment but this was a fast saturating market. Pressure from investors had been increasing to explore newer areas of growth like customer relationship management (CRM), product lifecycle management (PLM) and supply chain management (SCM).
Move to Niche Markets
Players in the industry were looking to move into niche markets due to saturation in the ERP market. To satisfy the demands of customers in the niche markets, who were usually small players, companies need to build niche software products. The aim was to provide the customers with industry specific functionality to lure them. SAP had tried to acquire Retek, a retail software specialist but was outbid by Oracle. It then went on to acquire Lighthammer Software Development Corporation, a manufacturing software maker. SAP had also acquired TomorrowNow, a PeopleSoft support firm after PeopleSoft had been acquired Oracle.
Focus on Mid-Market
The goals of mid-size companies were the same as large enterprises but they had fewer resources to attain them. They had to innovate faster wanted software which offered simplicity. SAP introduced two scaled down versions of its ERP product to meet the demands of mid and small size businesses. It also prepared itself to launch its first pay-as-you-go service, a CRM offering, in 2005 to compete with Siebel Systems Inc. and Salesforce.com Inc.
New Product Offering
NetWeaver, the open platform introduced by SAP, allowed applications to be built and accessed as Web Services. This technology would allow linkages with applications running on systems ranging from mainframes to internet enabled devices. All that was required was that these applications had to be packaged as Web Services.Using NetWeaver, SAP could now provide its huge software products as smaller modular pieces and customers could choose the module they wanted. NetWeaver also allowed for addition of modules developed by other companies. Customers who had already invested a lot of money in IT found it very difficult to keep up with technological change because change usually meant replacing the entire system and therefore huge investments. NetWeaver would reduce the costs of change since it provided for integration of a SAP and a non SAP system and hence the entire system would not have to be replaced.
This technology would also helpreduce the waiting time for releases. NetWeaver was released as a free bundled software in 2003. If it were to be accepted as a common platform SAP hoped that developers would create specialized industry specific modules and SAP would be able to penetrate the small and mid-sized enterprises market.
The introduction of NetWeavermarked the transition of SAP from 'a closed source software developer to an open source software integrator'. For the purpose of this transition SAP needed to acquire additional resources:
Build virtual workforce: To contribute to this platform, SAP needed to attract individual developers. In fact, SAP poached George Paolini from Sun Microsystems to help build developer communities. Today SAP has created a SAP Developer Network (SDN), Business Process Expert Community, Industry Value Networks and Enterprise Services Community.
Build governance expertise: SAP would need to build knowledge related to issues like how licensing related to its open source projects will be handled, process to select which open source software can be used within the organization, how community contributions to their project will be managed. SAP was one of the founding members of the Eclipse foundation and is its third largest corporate contributor.
Developers' knowledge: Developers working on open source projects or using open source projects need to be aware of the legal aspects involved.
Partnerships with customers: Under this new approach, it was possible that customers would decrease purchases from SAP and start buying from other vendors as long as the module could be plugged into NetWeaver. It was important for SAP to keep its customers engaged and offer them the right value proposition. To reach out to its customers SAP has formed relationships with channel partners, service partners, software solution partners and technology partners. SAP's channel partners help it to reach out to small and mid-sized companies, the software solution partners design and build complementary software solutions based on SAP technology and service partners provide services but use the SAP platform for their operations and the technology partners collaborate with SAP on technology. SAP has the SAP PartnerEdge, SAP Extended Business Program, SAP Referral Program and the Global SAP Co-Innovation Lab (COIL) network to connect with its various partners.
Ecosystems to protect existing alliances:By the introduction of NetWeaver, SAP's alliance with some of its long trusted partners like Microsoft and Dell was threatened as they could now come into direct competition. IBM is SAP technology, service, and software partner and several IBM service subsidiaries are SAP's channel partners. In 2007, SAP and IBM signed an agreement to develop their first joint product and in 2009, Alloy software, which combines Lotus Notes with SAP Business Suite was released. Dell is SAP's global technology partner and runs SAP Customer Competence Centers which act as points of contact for SAP application benchmarking on Dell equipment. In fact there exist SAP certified Dell PowerEdge servers.
NetWeavercould never really compete with IBM, Microsoft or Oracle in the middleware market. Some critics have stated that the technology behind was not strong enough. The year 2009, was one of the worst times for SAP. The employee engagement survey had shown that the employee morale was very low and that they did not trust the management, the customers too did not have much trust in SAP, the launch of the Business by Design was delayed till 2010 and the revenues, market share and reputation had taken a hit. To make matters worse, SAP announced that it would cut 3000 jobs globally by the end of 2009. This had come as a shock to most people in the industry. In March 2010, CEO Leo Apotheker's contract was not renewed and he stepped down. Analysts believe this had happened because the company did not have a strategy. After this, SAP went back to its policy of joint CEOs and Bill McDermott and Jim HagemannSnabewere appointed as co-chief executives of SAP.
McDermott and Snabehave scripted what is being labeled as a dramatic turnaround. They have reduced the bureaucracy in the organization and provided a strategy to an organization which had become extremely 'inward looking'. In 2005, SAP had set a target of attaining 100,000 by 2010 and they have achieved this goal. Today 74% of SAP's business comes from small and mid-sized enterprises. Business by Design has also finally managed to see the light of the day. The focus is back on the customer again.