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Letter from the CEO

Dear Stakeholders of SAP,

On behalf of the 84,000 employees of SAP, it is my distinct privilege to present the SAP Integrated Report 2016. Backed by a strong financial, social and environmental performance, we have never been more committed to our customers, colleagues, vision and strategy. As the platform company for digital business, we are focused on Impact Through Innovation. As a purpose driven company, we are focused on strengthening the economy, society and the environment for all people. Driven by our ambition and guided by our values, we believe that SAP’s best days are truly yet to come.

SAP’s Results

Since 2010, we have worked hard to earn results that speak for themselves. Our revenue, operating income, and market value have all more than doubled. Our customer count has tripled. We have progressed from a nascent cloud business to having the most cloud users in the business software industry. And most significantly, we have scaled a once-in-a-generation new data architecture with SAP HANA.

We continued our momentum in 2016. We again delivered a trifecta of strong software sales, fast cloud growth and operating income expansion. Non-IFRS cloud revenue powered to 31% growth. Cloud and software grew 8%, IFRS operating profit was up 20%, while non-IFRS operating profit expanded to a record 6.6 billion euros. New cloud bookings surged 31% in the full year, which means that we have a three billion euro business growing more than 30%. The road ahead looks equally strong, as cloud backlog soared 47% to 5.4 billion euros, greatly enhancing the predictability of our future cloud revenue.

Our business is healthy and our company is happy. As a truly integrated report, we also showcase non-financial indicators and their financial impact. For example, employee engagement is at an all-time high. Our employees are healthier than ever based on our Business Health Culture Index. Our colleagues are dedicating more time to serving their communities through our social sabbatical program and month of service. We beat our CO2 reduction target and continue to power data centers and facilities with 100% renewable energy. These factors have led us, for the 10th year in a row, to be the number one software company in the Dow Jones Sustainability Index. Our commitment to diversity and inclusion has also never been stronger, which led us to become the first global IT company to earn EDGE certification for our focus on gender equality.

In the true spirit of our founders, especially our chairman Hasso Plattner, SAP is never content to rest on past success. We continue to pursue an aggressive innovation agenda and remain confident in our long-term ability to continue delivering profitable growth.

A Statement About Our Challenges and Opportunities

When we introduced a new operating principle in 2014 – Run Simple – many observers challenged us. SAP software, they said, is not particularly simple. This is true. SAP software is the most sophisticated software in the information technology industry. It runs the largest enterprises in business, healthcare, public services agencies and beyond. 76% of the world’s financial transactions touch an SAP system and nearly one trillion U.S. dollars in commerce is transacted across our cloud business networks. This is truly innovation at scale on a global basis.

So why did we make a bold move for “simple”? We did it because reducing complexity is the defining priority of this young century, while handling complexity is SAP’s 45-year core competency.

Consider the following about the state of the world:

  • Businesses in every industry are confronting digital transformation. 55% of the companies listed in Fortune magazine’s 500 list actually lost money as they faced disruptive competition. On every topic, from customer engagement to finance and supply chain, businesses are immersed in a period of complex change.
  • Technology is evolving faster than ever, challenging businesses to adopt early or risk inevitable decline.
  • People are nervous about the implications of a new digital economy. As a result of this anxiety, the public debate has become more emotionally charged and intense than ever before.

Taken together, this is an intense maze of circumstances. The challenge to SAP is therefore unmistakable. We must design and deliver technology that eliminates the wrath of complexity from the experiences of end users:

  • For consumers, who expect businesses to know them, to understand their preferences, and to personalize their experience;
  • For employees, who want to understand the connection of their work to the results of their company, and;
  • For citizens, who now more than ever want transparency and highly responsive public services.

To the customers of SAP, we enthusiastically redouble our commitment to your success. We believe that addressing your complexity requires heightened empathy, intellectual curiosity and above all humility. Please measure us on our ability to understand your business strategy and challenges. Measure us on the clarity with which we guide your digital transformation and your innovation road map. Measure us on our ability to make you early adopters of machine learning, the Internet of Things, blockchain and other breakthrough innovations.

To the stakeholders of SAP, we respectfully request that you hold us accountable for our ability to remain a customer-driven growth company. Measure us on the success of our SAP Cloud Platform, our SAP S/4HANA digital ERP, our cloud business networks, and applications. Measure us on the high quality of our user experience and our commitment to design thinking and innovation. Measure us on modern services and support, hallmarks of our hard-earned reputation for customer loyalty. Measure us on our advocacy for human rights, environmental sustainability, and corporate social responsibility.

If our business results continue on the positive trajectory of the past seven years, you will know that we have kept these promises. Equally critical, if our social results such as employee engagement, diversity and sustainability continue, you will know that we stayed true to our vision to help the world run better and improve people’s lives. We remain ever grateful for your confidence, your trust, and your support.

Very truly yours,

Bill McDermott

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