Revenue
Target for Software and Software-Related Service Revenue Surpassed
At the beginning of 2007, we announced ambitious guidance: We set a target of growing our annual software and software-related service revenue 12% to 14%, compared on a constant currency basis with 2006. We expected subscriptions and other software-related services to account for approximately 2% to 4% of total software and software-related service revenue. Later in the year, we also announced that we expected software and software-related service revenue growth to be at the top end of the target range that we had announced earlier. Our performance exceeded that guidance: On a constant currency basis, software and software-related service revenue grew 17% (13% without adjustment for foreign currency effects) to €7,427 million (2006: €6,596 million; 2005: €5,955 million). This was the fourth year in succession in which we achieved double-digit percentage growth in software and software-related service revenue on a constant currency basis. The proportion of subscriptions and other software-related services in the total software and software-related service revenue was 2.5%, which was within the range published in our guidance.
When discussing SAP’s position in the market, we define our segment share as our share of the worldwide total of organizations offering core enterprise applications. For 2006, we calculated our share based on software revenue. In view of the rearrangement of our income statement, beginning with the first quarter of 2007 we now base our calculations of segment share on software and software-related service revenue. We believe this measure is now the most significant indicator of share. With the help of industry analysts’ numbers, we estimate that the market for core enterprise applications is approximately US$36.7 billion. Our share of that segment worldwide grew four percentage points to 28.4% in 2007. In this improvement in our market position we see validation of our approach, which is to earn the confidence of customers with our clear, innovative product strategy, in-depth understanding of the industries our customers operate in, and a superior product offering – and on that confidence we aim to build long-term business relationships.
Our customer base continued to grow and, based on the number of contracts among orders received, 31% of our software revenue was attributable to contracts with new customers (2006: 31%; 2005: 33%). The number of new software license contracts valued at €10,000 or more increased 18% to 12,154 (2006: 10,288 contracts; 2005: 8,820 contracts). The total number of orders we received grew 10%, so the trend toward more but smaller contracts continued.
Software Revenue Grows 13%
Software revenue increased 13% to €3,407 million (2006: €3,003 million; 2005: €2,743 million). That corresponds to an 18% increase on a constant currency basis. It was our best constant-currency based software revenue growth since 2000.
Support Revenue Grows 11%; Consulting Revenue Declines 1%; Training Revenue Grows 7%
Support revenue increased 11% to €3,838 million (2006: €3,464 million; 2005: €3,170 million). That corresponds to an 15% increase on a constant currency basis. Continuing an initiative from the previous year, we concluded more global enterprise agreements (GEAs) with our customers in 2007. GEAs are subscription contracts that include both the license grant and maintenance provisions. In 2007, we concluded such agreements to a total value of about €820 million, which will be recognized as revenue over a period of years. The portion of our total revenue that was generated from software and software-related services was on target at 73% (2006: 70%).
We again focused more on the profitability of our consulting business than on its growth. In the context of adverse exchange rate movements, our consulting revenue fell back 1% from €2,249 million to €2,221 million (2005: €2,071 million), but grew 2% on a constant currency basis. Our e-learning programs were much in demand, which contributed to a boost in our training revenue of 7% (11% on a constant currency basis) from €383 million to €410 million (2005: €342 million). It was the third year in succession in which we achieved double-digit constant-currency based growth in training revenue. Total professional services and other service revenue grew 1% (4% on a constant currency basis) to €2,744 million (2006: €2,728 million; 2005: €2,484 million).
Total Revenue Grows 9%
Buoyed by the dynamic growth of software and software-related service revenue, our total revenue for the year was €10,242 million (2006: €9,393 million; 2005: €8,509 million), an increase of 9% (or 13% on a constant currency basis). That made 2007 the third year in succession in which we achieved double-digit growth in total revenue on a constant currency basis – and the first in which our total revenue exceeded €10 billion.
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