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Economy and the Market

Global Economic Trends

In its latest economic bulletin, the European Central Bank (ECB) concludes that the global economy grew steadily in 2016 at a similar pace as the year before, with relatively stable expansion in advanced economies and a slight improvement in emerging market economies. According to the ECB, acute uncertainty about the political and economic impact of the presidential election in the United States shaped global sentiment at the end of the year.

For the Europe, Middle East, and Africa (EMEA) region, the ECB reports that economic recovery in the euro area continued throughout 2016, supported by the ECB’s own monetary policy measures which it finds helped revitalize domestic demand in the euro area and reduce debt. According to its calculations, the real gross domestic product of the euro area countries grew 1.7% in 2016. The economies of many of the Central and Eastern Europe countries also performed well in 2016, the ECB writes. There were even signs of an economic rebound in Russia, but expansion there stayed slightly negative for the year as a whole.

In the North America and Latin America (Americas) region, continued low interest rate policies and improving labor markets stimulated the U.S. economy in 2016, the ECB reports, with economic activity in the United States improving markedly in the second half of 2016, following modest growth in the first half. In Brazil, the recession is believed to have slowly bottomed out in the second half of the year.

In the Asia Pacific Japan (APJ) region, soft foreign demand and weak private consumption caused Japan's economy to advance at only a very modest pace, the ECB notes. In China, meanwhile, economic growth continued to slow in 2016 but, according to the ECB, eventually stabilized in the second half-year, supported by strong consumption and infrastructure spending.

The IT Market

According to Gartner Market Databook December 2016 by Gartner, a market research firm, “worldwide IT spending is forecast to grow 0.5% in 2016 on a constant-currency basis. However, currency rate changes will limit market growth to negative 0.6%. Software is the best-performing segment, with 6.9% growth in 2016 constant currency, while Emerging Asia/Pacific is the fastest-growing region/country, at 2.9%.”

In the Europe, Middle East, and Africa (EMEA) region, growth declined year-over-year in the Western European IT market from 3.6% to –0.1% and the Eastern European IT market declined from 15.8% to 1.8% (see table in paragraph “Expected Developments and Opportunities”: “Trends in the IT Market – IT spending Year-on-Year”, created by SAP on the basis of Gartner Market Databook, 4Q16 Update, 21 December 2016). According to the same table, software spending grew significantly faster than all other submarkets throughout the region.

The Americas region likewise recorded lower growth rates in IT spending than the previous year as can be seen in the table mentioned above. According to the same table, software spending nevertheless significantly outperformed IT spending as a whole.

In the Asia Pacific Japan (APJ) region, software spending grew faster than all other submarkets in the IT industry as well, documented in the table mentioned above.

Source: Gartner Market Databook, 4Q16 Update, 21 December 2016.

The Gartner Report described herein, (the “Gartner Report”) represents research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. (“Gartner”), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of the date of this Annual Report) and the opinions expressed in the Gartner Report are subject to change without notice.

Impact on SAP

In 2016, we once again succeeded in significantly expanding our business and outperformed the overall global economy and IT industry in 2016 with regards to revenue growth. Our good 2016 results are further evidence that our strategy of innovating across the core, the cloud, and business networks to help our customers become true digital enterprises is the right way forward.

In 2016, we again demonstrated that we are consistently pursuing our strategy for innovation and growth – and that globally, we are able to generate growth that few other IT companies can match – in three respects: in revenue from core business and cloud business, and in operating profit.

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