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A CHALLENGING YEAR
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In 2003, business priorities for companies worldwide included pressures for better corporate
governance; focus on core business, primarily cost controls, lean operations, and efficiency;
and ensuring that customers were at the center of business. Companies sought to increase profitability
by running their businesses more effectively, and wanted to ensure that they had the
flexibility to exploit the new opportunities that an economic recovery would create. Technology
was considered crucial to achieving these business goals. However, information technology (IT)
investments needed to make a faster return than in the past and so this aspect was closely monitored
in all projects. Companies were looking for, and will continue to look for, technology
solutions to solve real business problems – gone are the days of technology for technology’s sake.
Decision-makers thus preferred manageable, lower risk projects with a swifter return on investment
(ROI), which led to an overall decline in deal size, a trend that SAP successfully managed
to offset through a 13% increase in the number of deals signed during 2003.
Software vendors were under greater pressure to deliver ever-evolving, futureproof
solutions to satisfy customers’ more exacting demands. 2003 saw substantial industry consolidation
and, in the business software sector, the effects were far-reaching. While SAP may
now face fewer competitors, the competitive landscape has become much more fierce. We experienced
unprecedented pricing pressures in 2003 but were able to benefit from good, long-established
relationships with customers and our image as a reliable partner. As many of our competitors
were looking internally to their own operations and faced self-induced challenges created
through mergers and acquisitions, SAP was able to sharpen its focus on meeting customers’
needs. For example, despite the strong currency impact on our license revenues and an overall
focus on growing operating margin, we increased spending on research and development (R&D)
by 9% year-on-year. Our commitment to innovating for our customers was recognized by
Wall Street Journal Europe, which gave its European Innovation Award to SAP for our work in
radio frequency identification (RFID) technology.
We restructured the Company to enable us to resolutely pursue our goals
and react flexibly to changes in IT buying patterns. A management transition took place when
Hasso Plattner, co-founder and former co-CEO, decided to leave the day-to-day operations
of SAP to dedicate his time to the mid- and long-term strategic direction of the Company. This
transition was effected smoothly, and the Company continued to execute on the strategy that
Hasso and I developed during our five years of shared leadership as co-CEOs of SAP. At the
Annual General Shareholders’ Meeting in May, you appointed Hasso to the Supervisory Board
and he was immediately named as its Chairperson.
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