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(28) Segment and Geographic Information

General Information

SAP has two reportable segments that are regularly reviewed by the Executive Board, which is responsible for assessing the performance of the Company and for making resource allocation decisions as the Chief Operating Decision Maker (CODM). One is the Applications, Technology & Services segment and the other is the SAP Business Network segment. The segments are largely organized and managed separately according to their product and service offerings.

The Applications, Technology & Services segment derives its revenues primarily from the sale of software licenses, subscriptions to our cloud applications, and related services (mainly support services and various professional services and premium support services, as well as implementation services for our software products and education services on the use of our products).

The SAP Business Network segment derives its revenues mainly from transaction fees charged for the use of SAP’s cloud-based collaborative business networks and from services relating to the SAP Business Network (including cloud applications, professional services, and education services). Within the SAP Business Network segment, we mainly market and sell the cloud offerings developed by SAP Ariba, SAP Fieldglass, and Concur.

On April 1, 2016, we split the Applications, Technology & Services segment. The solutions SAP Anywhere, SAP Business One, and SAP Business ByDesign were combined into one organization, as together they provide complete front-office and back-office solutions for small and medium-sized customers. This reallocation resulted in a new operating but non-reportable segment since it does not exceed the quantitative thresholds in IFRS 8.13. We have retrospectively adjusted our revenue and results for the Applications, Technology & Services segment to reflect this change.

In addition, we established a further operating segment comprising SAP’s healthcare strategy and solutions, which also does not qualify as a reportable segment due to its size. Since this segment represents a new business area to SAP, no significant adjustments to prior-year figures of other segments were made. Revenue and expenses of both non-reportable segments are included in the reconciliation of segment revenue and results.

Revenue and Results of Segments

€ millions Applications, Technology & Services SAP Business Network Total Reportable Segments
2016 2015 2016 2015 2016 2015
Actual
Currency
Constant
Currency
Actual
Currency
Actual
Currency
Constant
Currency
Actual
Currency
Actual
Currency
Constant
Currency
Actual
Currency
Cloud subscriptions and support 1,353 1,371 932 1,595 1,589 1,337 2,948 2,960 2,268
Software licenses 4,784 4,814 4,770 0 0 −1 4,783 4,813 4,770
Software support 10,464 10,544 9,990 28 28 31 10,492 10,572 10,021
Software licenses and support 15,247 15,358 14,760 27 27 30 15,275 15,385 14,790
Cloud and software 16,600 16,729 15,692 1,622 1,617 1,367 18,223 18,346 17,059
Services 3,319 3,358 3,271 303 304 249 3,622 3,661 3,520
Total segment revenue 19,920 20,087 18,963 1,925 1,920 1,616 21,845 22,007 20,579
Cost of cloud subscriptions and support −667 −669 −444 −384 −385 −336 −1,051 −1,055 −781
Cost of software licenses and support −1,942 −1,956 −1,971 −1 −1 −1 −1,943 −1,957 −1,972
Cost of cloud and software −2,610 −2,626 −2,416 −385 −386 −337 −2,994 −3,012 −2,753
Cost of services −2,669 −2,718 −2,539 −246 −249 −183 −2,915 −2,967 −2,722
Total cost of revenue −5,279 −5,344 −4,954 −631 −635 −520 −5,909 −5,979 −5,474
Segment gross profit 14,641 14,743 14,009 1,295 1,285 1,095 15,936 16,028 15,104
Other segment expenses −6,610 −6,704 −6,286 −957 −968 −779 −7,567 −7,672 −7,064
Segment profit 8,031 8,039 7,723 338 317 317 8,369 8,356 8,040

Revenue and Results of Segments

€ millions Applications, Technology & Services SAP Business Network Total Reportable Segments
2015 2014 2015 2014 2015 2014
Actual
Currency
Constant
Currency
Actual
Currency
Actual
Currency
Constant
Currency
Actual
Currency
Actual
Currency
Constant
Currency
Actual
Currency
Cloud subscriptions and support 932 822 564 1,337 1,151 515 2,268 1,974 1,080
Software licenses 4,770 4,520 4,324 −1 −1 0 4,770 4,519 4,324
Software support 9,990 9,321 8,748 31 26 29 10,021 9,347 8,777
Software licenses and support 14,760 13,841 13,072 30 25 28 14,790 13,866 13,100
Cloud and software 15,692 14,663 13,636 1,367 1,176 544 17,059 15,839 14,180
Services 3,271 3,036 3,098 249 214 103 3,520 3,250 3,201
Total segment revenue 18,963 17,699 16,734 1,616 1,391 647 20,579 19,090 17,381
Cost of cloud subscriptions and support −444 −414 −258 −336 −293 −128 −781 −707 −386
Cost of software licenses and support −1,971 −1,809 −1,801 −1 −1 −3 −1,972 −1,810 −1,804
Cost of cloud and software −2,416 −2,223 −2,059 −337 −294 −131 −2,753 −2,517 −2,190
Cost of services −2,539 −2,401 −2,198 −183 −162 −82 −2,722 −2,563 −2,280
Total cost of revenue −4,954 −4,624 −4,257 −520 −456 −213 −5,474 −5,080 −4,470
Segment gross profit 14,009 13,075 12,477 1,095 935 434 15,104 14,010 12,911
Other segment expenses −6,286 −5,875 −5,531 −779 −682 −330 −7,064 −6,556 −5,861
Segment profit 7,723 7,200 6,946 317 253 105 8,040 7,453 7,050

Information about assets and liabilities and additions to non-current assets by segment are not regularly provided to our Executive Board. Goodwill by reportable segment is disclosed in Note (15).

Measurement and Presentation

Our management reporting system reports our intersegment services as cost reductions and does not track them as internal revenue. Intersegment services mainly represent utilization of human resources of one segment by another segment on a project-by-project basis. Intersegment services are charged based on internal cost rates including certain indirect overhead costs, excluding a profit margin.

Most of our depreciation and amortization expense affecting segment profits is allocated to the segments as part of broader infrastructure allocations and is thus not tracked separately on the operating segment level. Depreciation and amortization expense that is directly allocated to the operating segments is immaterial in all segments presented.

Our management reporting system produces a variety of reports that differ by the currency exchange rates used in the accounting for foreign-currency transactions and operations. Reports based on actual currencies use the same currency rates as are used in our financial statements. Reports based on constant currencies report revenues and expenses using the average exchange rates from the previous year’s corresponding period.

We use an operating profit indicator to measure the performance of our operating segments. However, the accounting policies applied in the measurement of operating segment revenue and profit differ as follows from the IFRS accounting principles used to determine the operating profit measure in our income statement:

The measurements of segment revenue and results include the recurring revenues that would have been recorded by acquired entities had they remained stand-alone entities but which are not recorded as revenue under IFRS due to fair value accounting for customer contracts in effect at the time of an acquisition.

The expenses measures exclude:

  • Acquisition-related charges
    • Amortization expense and impairment charges for intangibles acquired in business combinations and certain stand-alone acquisitions of intellectual property (including purchased in-process research and development)
    • Settlements of pre-existing relationships in connection with a business combination
    • Acquisition-related third-party costs
  • Share-based payment expenses
  • Restructuring expenses
  • Expenses from the TomorrowNow litigation and the Versata litigation

Revenues and expenses of our new operating but non-reportable segments are included in the reconciliation under the positions other revenue and other expenses, respectively.

In addition, certain corporate-level activities are not allocated to our segments, including finance, accounting, legal, human resources, and marketing. They are disclosed in the reconciliation under other revenue and other expenses respectively.

The segment information for prior periods has been restated to conform to the current year’s presentation.

Reconciliation of Revenue and Segment Results

€ millions 2016 2015 2014
Actual
Currency
Constant
Currency
Actual
Currency
Constant
Currency
Actual
Currency
Total segment revenue for reportable segments 21,845 22,007 20,579 19,090 17,381
Other revenue 222 224 226 209 199
Adjustment for currency impact 0 −164 0 1,505 0
Adjustment of revenue under fair value accounting −5 −5 −11 −11 −19
Total revenue 22,062 22,062 20,793 20,793 17,560
Total segment profit for reportable segments 8,369 8,356 8,040 7,453 7,050
Other revenue 222 224 226 209 199
Other expenses −1,957 −1,975 −1,918 −1,759 −1,611
Adjustment for currency impact 0 28 0 443 0
Adjustment for
Revenue under fair value accounting −5 −5 −11 −11 −19
Acquisition-related charges −680 −680 −738 −738 −562
Share-based payment expenses −785 −785 −724 −724 −290
Restructuring −28 −28 −621 −621 −126
TomorrowNow and Versata litigation 0 0 0 0 −309
Operating profit 5,135 5,135 4,252 4,252 4,331
Other non-operating income/expense, net −234 −234 −256 −256 49
Financial income, net −38 −38 −5 −5 −25
Profit before tax 4,863 4,863 3,991 3,991 4,355

Geographic Information

The amounts for revenue by region in the following tables are based on the location of customers. The regions in the following table are broken down into the regions EMEA (Europe, Middle East, and Africa), Americas (North America and Latin America), and APJ (Asia Pacific Japan).

Revenue by Region

€ millions Cloud Subscriptions
and Support Revenue
Cloud and Software Revenue
2016 2015 2014 2016 2015 2014
EMEA 703 507 277 8,193 7,622 6,819
Americas 2,000 1,579 709 7,366 6,929 5,276
APJ 290 200 101 2,865 2,663 2,221
SAP Group 2,993 2,286 1,087 18,424 17,214 14,315

Total Revenue by Region

€ millions 2016 2015 2014
Germany 3,034 2,771 2,570
Rest of EMEA 6,721 6,409 5,813
EMEA 9,755 9,181 8,383
United States 7,167 6,750 4,898
Rest of Americas 1,763 1,678 1,591
Americas 8,931 8,428 6,489
Japan 825 667 600
Rest of APJ 2,552 2,517 2,088
APJ 3,377 3,185 2,688
SAP Group 22,062 20,793 17,560

Non-Current Assets by Region

€ millions 2016 2015
Germany 2,655 2,395
Rest of EMEA 5,281 7,574
EMEA 7,936 9,969
United States 21,911 19,124
Rest of Americas 165 139
Americas 22,076 19,264
APJ 685 599
SAP Group 30,696 29,832

The table above shows non-current assets excluding financial instruments, deferred tax assets, post-employment benefit assets, and rights arising under insurance contracts.

For information about the breakdown of our workforce by region, see Note (7).

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