LEADING THE INDUSTRY

2004 was truly a year to remember for SAP, a major turning point in our more than 30-year history. We solidified our leadership position in the IT industry, reiterated our focus on our customers, and continued to drive our vision for the future of IT.

We demonstrated this leadership position time and time again in 2004. One of the major highlights was the general availability at the end of the third quarter of 2004 of our leading application and integration platform, SAP NetWeaver. We also delivered the latest version of our flagship product mySAP ERP, the successor to SAP R/3. This is an important milestone because it is the first service-oriented business application on the market based on SAP NetWeaver. In addition, we have a clear maintenance strategy in place to help our customers smoothly transition from SAP R/3 to mySAP ERP and therefore improve their productivity.

Our excellent results across the globe and across our product portfolio reflect the fact that our customers view us as the viable and leading expert in helping them prepare for the ever-changing business environment in which we operate (overall customer satisfaction is at an all-time high). Regional successes include 38% constant-currency software growth in the United States and success in emerging markets, such as China, India, and Russia. Product highlights include our now number-one position in all major solution areas: enterprise resource planning, customer relationship management, supply chain management, supplier relationship management, and product life-cycle management, as well as our success in several key industries.

Over the past year, our strength is also an indication of our successful transition to a volume business model: The number of contracts from the direct sales channel increased 12% year-on-year and from the indirect channel the number increased by 47% year-on-year. Even more importantly, in 2004 we demonstrated our leadership not only in the large enterprise segment, but also in the midmarket – 31% of SAP’s total order entry comes from companies with less than 2,500 employees or less than US$1 billion in revenue. Based on these numbers, SAP generated more business in the midmarket segment than any of our peer group competitors generated in total.