To continue to win in the extremely competitive software industry, in 2005, SAP invested more than US $1 billion in the development of the tools and technologies of tomorrow. Research and development projects are distributed globally across SAP's infrastructure.

SAP Research is a worldwide organization that identifies emerging IT trends, conducts vital research and development for new technologies, and fosters the best entrepreneurial talent to support future growth. The group is headquartered in Germany, with additional facilities in Australia, Canada, France, South Africa, the United Kingdom, and the United States. SAP Research employs an outside-in approach, looking to universities, industry research centers, and other institutions for technological trends that may be relevant to SAP and its customers.

In addition to the global research and development network, SAP Ventures invests in companies that offer exciting new technologies and applications. Independent from SAP's overall strategy, SAP Ventures has the freedom to pursue a portfolio of different opportunities. At the same time, it carries the benefit of SAP's knowledge and market experience, which it can pass on to its portfolio companies. Examples of investments from 2005 include Avokia Inc., Black Duck Software, Inc., Factory Logic, Inc., Ping Identity Corporation, and iTAC Software AG.

Furthermore, SAP Inspire actively solicits and cultivates ideas from employees, partners, and customers. In 2005, the group investigated more then 400 ideas submitted online to SAP Inspire – with three of those ideas receiving Board approval and funding.

SAP product development units are responsible for the entire SAP product and solution portfolio. With operations in Bulgaria, Germany, France, India, Israel, China, Japan, and North America, SAP development units integrate ideas and leading-edge technologies that address the needs of specific industries and geographic regions, and keep SAP and its customers at the forefront of business success.

Following are several examples of success in the area of product innovation:

• Duet – In 2005, SAP and Microsoft introduced the first jointly-developed product from the two companies. Formerly known as Mendocino, the Duet solution is designed to provide a strong bridge between SAP's business applications and Microsoft's desktop productivity tools, opening up new opportunities to bring SAP functionality to a larger class of end users, and helping customers make enormous productivity gains.
• SAP xApp Analytics – In 2005, SAP unveiled SAP xApp Analytics, which is made up of more than 100 industry-specific analytic applications that empower users by pulling all relevant information – whether historical or up-to-date – from a wide variety of enterprise systems to deliver clear and comprehensive business insights. SAP xApp Analytics is unique in its ability to deliver data in the business context of the specific process at hand – letting a business manager know, for example, not only the day's sales figures but also whether these figures are on target compared to past performance and the current year's revenue goals.
• SAP CRM on-demand solution – SAP has created the first hybrid CRM solution that transcends conventional on-demand (Internet-delivered, pay-as-you-go model) and on-premise solutions (traditional in-house enterprise solutions), while integrating with core enterprise solutions. This unique hybrid approach pioneers a model that combines high availability and low risk with exceptional efficiencies and deployment speed.