Empowering Our Customers to Become Digital Businesses
In 2016, we continued to give top priority to supporting our customers on their individual paths into the digital economy, defining our strategy around the following cornerstones:
- Enabling business with a digital data foundation
- Running business with modern business applications and business networks
- Differentiating business with a digital enterprise platform
- Steering business with real-time analytics
- Reinventing business with machine learning and theInternet of Things
- Making companies’ digital transformations possible with SAP Digital Business Services
SAP HANA – Enabling Business with a Digital Data Foundation
SAP HANA is our in-memory computing platform that lets companies accelerate business processes, deliver more business intelligence, and simplify their IT environment. SAP HANA removes the burden of maintaining separate legacy systems and siloed data, so companies can run live and business people can make better business decisions in the new digital economy. Emphasizing our cloud-first strategy, SAP HANA can be deployed on several public cloud infrastructures.
With our second version of SAP HANA, we launched a truly next-generation platform. It enables the reduction of time-consuming database and data management tasks and delivers intelligent applications that leverage advanced analytic processing and empowers all users with deeper insight into any data from anywhere.
Our cloud-first strategy requires a very strong offering to handle Big Data in the cloud. With SAP Cloud Platform Big Data Service, which is powered by SAP HANA, we run multitenant-aware Hadoop systems and provide end-to-end capabilities to efficiently manage and scale Big Data initiatives.
Running Business with Modern Business Applications and Business Networks
SAP S/4HANA – Reimagining the Business Suite for the Digital Age
SAP S/4HANA, our next-generation business suite, allows our customers to embrace the digital economy. The digital core is the foundation for running a Live Business:
- Immediate – Empowering business users with insights to act in the moment
- Intelligent – Going beyond automation to provide predictive suggestions
- Integrated – Connecting not only customer functions but also people, things, and businesses
Based on SAP HANA, SAP S/4HANA software can store and process huge amounts of data while significantly reducing an organization’s data footprint. This means our customers can save time and cost.
Available in the cloud, on premise, or as a hybrid deployment, in 2016, SAP S/4HANA evolved from a finance-focused offering into a full digital-age ERP system. It enables insight and understanding so businesses can predict outcomes and use that data to make decisions live, which helps companies stay competitive in the digital economy. SAP S/4HANA can replace a traditional ERP solution across all lines of business (LoBs), such as finance, human resources, sales, service, procurement, manufacturing, asset management, supply chain, and research and development (R&D).
Customers recognize the benefits and power of SAP S/4HANA and, at the end of 2016, more than 5,400 customers had chosen the suite to support their digital transformation.
SAP S/4HANA Cloud – Delivering the Power of the Digital Core
In addition to our on-premise suite SAP S/4HANA, we further strengthened our SAP S/4HANA Cloud offering, delivering the power of a digital core with the key benefits expected from a software-as-a-service solution. It provides the scalability, ease of management, and security required in today’s digital economy. A quarterly release cycle helps ensure that customers can benefit from regularly delivered innovations with minimum disruption to their business.
SAP S/4HANA Cloud is comprised of various solutions targeted to meet the specific business needs of our customers and enable their journey to the cloud. For example, the SAP S/4HANA Enterprise Management Cloud solution provides a next-generation ERP suite in the cloud with integrated, end-to-end processes.
SAP S/4HANA Cloud was developed to co-exist in a heterogeneous system landscape with native integration to other SAP solutions and open interfaces for further integration and extensions using SAP Cloud Platform (formerly called SAP HANA Cloud Platform). The solution also supports specific industry and LoB requirements with preconfigured content from SAP Best Practices packages and uses the award-winning SAP Fiori user experience (UX) to provide simplified, role-based usability.
Extending Our Reach Through a Broad Ecosystem
SAP’s ecosystem and partners extend our reach in the marketplace. We work closely with more than 15,000 partners worldwide to provide SAP solutions for our customers. Partners continue to drive SAP S/4HANA and our solutions for small businesses and midsize enterprises (SMEs) – SAP Business ByDesign and SAP Business One – to prospects on behalf of SAP, accounting for more than 88% of all new SAP customers.
Innovating for LoBs and Industries
As a modular integrated suite, SAP S/4HANA is the backbone of a company. And, at the same time, we are building functional innovations for LoBs and industries to address our customers’ specific and evolving needs.
SAP covers 25 industries grouped in six industry sectors and 12 lines of business:
In addition, we are building other functional innovations that serve specific lines of business, for example:
Human Capital Management
Our human capital management (HCM) offerings, including SAP SuccessFactors solutions, help organizations increase the value of their total workforce by developing, managing, engaging, and empowering their people. SAP SuccessFactors HCM Suite addresses a full range of HR needs and encompasses the following:
- Core human resources – SAP SuccessFactors Employee Central and SAP SuccessFactors Employee Central Payroll solutions cover the administrative tasks required to manage an organization’s workforce. More specifically, this includes HR administration, payroll, position management, global benefits, time and attendance, shared services, and employee and manager self-service capabilities. The solutions act as the key source of employee and worker data and typically integrate with hundreds of external and internal systems, including SAP S/4HANA. At the end of 2016, customers for SAP SuccessFactors Employee Central numbered more than 1,580.
- Talent management – Our suite comprises solutions for all pillars of talent management, recruiting (marketing and management), onboarding, performance management, development, succession planning, compensation planning and administration, learning, and workforce analytics.
We focus on delivering a simple and intuitive UX for our HCM suite through mobile device or desktop.
Customer Engagement and Commerce (CEC)
Today’s customers are digitally connected, socially networked, and individually empowered, changing the rules of engagement. Our integrated front-office suite encompasses a holistic offering across customer experience, commerce, marketing, sales, billing, and services.
By providing leading omnichannel customer engagement and commerce solutions across any touch point and channel, we enable organizations (both business-to-consumer and business-to-business) to deliver contextual, consistent, and relevant experiences – regardless of channel or device – throughout the customer journey.
Connecting Companies with Business Networks
Our business networks are best-in-class cloud applications that connect a global ecosystem of customers, suppliers, and partners. The products and services go beyond the four walls of a business to integrate and connect systems, services, partners, and data – creating more efficient, more powerful, and far simpler ways to manage key business functions. They provide the outcomes and experiences business users need through open and connected platforms.
Included in the business networks portfolio are SAP’s market-leading Concur, SAP Ariba, and SAP Fieldglass solutions, which are at the center of our business network strategy.
Ariba Network is the world’s largest business network, with more than 2.5 million connected companies trading over US$885 billion of commerce on the network, which has grown its commerce volume close to 20% year-over-year. In 2016, we unveiled innovations that help businesses achieve efficient, intelligent connections and frictionless transactions across the entire source-to-pay process:
- Guided buying – A new buying experience automatically leads employees to goods and services they need to do their jobs and execute purchases in compliance with company policies.
- Light enablement – This interactive e-mail service eliminates the complexity that buyers face in onboarding and connecting suppliers, letting them send purchase orders and receive order confirmations and invoices in just a few clicks.
- Open platform – Ariba Network offers an open application-programming interface (API) capability that allows partners to add functionality and extend solutions for all industries and business needs.
With more than 45 million users worldwide, our acquired company Concur is the world leader in travel and expense management solutions. In 2016, Concur continued to deliver on our vision of an open cloud platform for travel and expense management that enables an effortless experience for end users as well as finance departments. It provides total transparency into employee travel and spending, wherever and whenever it happens.
New innovations for travel, expense, and accounts payable automation in Concur solutions include:
- User interface improvements and the addition of many region-specific partners to our ecosystem
- Integration with the SAP ERP Financials and Intuit Quickbooks solutions
- Expansion of global tax capabilities
- Additional features in the Concur Invoice solution to help ensure a three-way match between purchase, receipt, and invoicing
SAP Fieldglass solutions help simplify procuring and managing external workforce services, connecting businesses in real time. In 2016, more than 3.1 million workers in approximately 135 countries were connected using the solution.
Market changes, including globalization and access to talent, have led many organizations to increasingly rely on contingent workers and service providers to achieve business goals. SAP Fieldglass cloud-based solutions also help companies engage and optimize all forms of talent. The software dynamically matches business needs with the right combination of resources while helping to ensure visibility, compliance, and cost control.
In 2016, we continued to redefine how work gets done in the enterprise, with innovations in SAP Fieldglass solutions including streamlined services procurement templates and extended flexible talent-sourcing capabilities.
Our business data network offers a comprehensive, people-first data-as-a-service solution that provides real-time, industry-specific, and data-driven benchmarks built on the world’s largest repository of networked business data and enriched by key industrial and economic indicators. In 2016, we produced a beta version of the first data-driven service based on contingent workforce data. The highly personalized user experience helps customers discover their standing in the market so that they can take advantage of live recommendations and collaboration workflows that turn insights into action. Using data strategically in this way, customers can operate more efficiently and create new data-driven business models.
SAP Connected Health
Building on many years of work in the healthcare and life sciences industries, SAP has deepened its investment in these areas. In 2016, we launched a SAP Connected Health platform with trusted partners. The platform supports new developments such as using very large data sets to conduct in-depth analysis of the human genome, proteome, and other biological data. It also enables a broad ecosystem of partners – including developers, researchers, and healthcare organizations – to accelerate the development and delivery of innovative, patient-centered solutions for improving health outcomes, reducing costs, and delivering connected healthcare services.
Building Better Solutions for Small and Midsize Enterprises
We offer a portfolio that extends the power of SAP HANA to support SMEs with their digital transformation that includes the followings solutions:
- SAP Anywhere: Our front-office solution for small businesses has been on the market for just over a year in China, the United Kingdom, and the United States. Currently, more than 185 customers are running SAP Anywhere.
- SAP Business ByDesign: Our ERP cloud solution is targeted to the midmarket and subsidiaries of large enterprises. At the end of 2016, 99% of SAP Business ByDesign customers ran the solution on SAP HANA.
- SAP Business One: Our integrated ERP application is available on premise or through a partner-hosted cloud. Today, more than 2,000 SAP Business One customers run the application on SAP HANA.
Our focus for SMEs, as with larger enterprises, is on cloud technology and simplified business processes for end users and partners. End-to-end accountability and increased investments in these core cloud ERP, on-premise ERP, and front-office solutions helps foster innovation and growth for the digital economy. Customers using SME solutions include small businesses and midsize companies in more than 100 countries.
Keeping User Experience in Focus
User experience (UX) is about meeting the user’s needs in the most effective and enjoyable way. Our understanding of how to create true innovation manifests itself in the award-winning SAP Fiori UX. The concept and design principles are key components in our design-led development process, which helps ensure the delivery of SAP Fiori innovations through all SAP applications.
With SAP Fiori 2.0, users can get their work done faster and more effectively, with:
- Direct access to relevant information and apps
- Transparency on items needing attention and timely notifications
- Support in deciding what needs to be done next
- Ability to perform quick and informed actions
At the same time, our UX strategy focuses on empowering our customers and partners to design their own UX journey and execute on it – through a rich portfolio of services, educational offerings, and tools and technologies to design, develop, and deliver a simplified UX.
SAP Cloud Platform – Differentiating Business with a Digital Enterprise Platform
In the digital economy, in addition to standard applications, companies need a highly flexible platform that allows them to do the following:
- Extend cloud and on-premise SAP applications
- Build new applications for differentiating LoB processes
- Integrate cloud and on-premise SAP applications
With SAP Cloud Platform, our in-memory platform-as-a-service, companies can rapidly build, run, and extend modern business applications. It offers comprehensive capabilities to help business users and developers create better, more agile applications in less time. Customers can apply, among other things, mobile services, advanced analytic tools, state-of-the-art authentication mechanisms, and social functionality. For maximum flexibility, portability, and agility, we use open technologies.
SAP Cloud Platform is a digital enterprise platform offering the following:
- Analytical capabilities
- Access to SAP applications, processes, and data
- Robust business services that customers and independent software vendors can consume to build solutions
Furthermore, we are positioning the SAP Cloud Platform Integration service as the default integration infrastructure for SAP solutions, whether in the cloud or on premise. We deliver content to support end-to-end integration scenarios. Being able to connect and integrate all best-of-breed applications to our digital core and to any custom-built solution makes SAP Cloud Platform the center of gravity for a modular suite of business applications.
Close partnerships with customers and other leading technology companies are key to providing best-in-class solutions. In 2016, we announced a strategic partnership with Apple Inc. to build a SAP Cloud Platform software development kit for iOS that enables businesses, designers, and developers to quickly and efficiently build their own native iOS apps for iPhones and iPads.
Steering Business with Real-Time Analytics
Business leaders need to be able to discover and communicate meaningful and actionable insights in data so they can make decisions in real time. Our analytics offerings help companies to apply analytics to business data to describe, predict, and improve business performance, recommend action, and guide decision making.
With SAP BW/4HANA, we launched next-generation data warehouse software, delivering a simpler and more powerful way to achieve real-time analytics by connecting historical data with live data stored in SAP and third-party software environments. This integrated data warehouse solution is optimized to fully leverage the SAP HANA platform and simplifies development, administration, and the user interface, resulting in enhanced business agility.
We consolidated analytical functionalities across our product portfolio in one cloud analytics solution – SAP BusinessObjects Cloud. Built on SAP Cloud Platform, it helps companies overcome the challenge of point solutions and data silos spread throughout the organization with enterprise-wide access to analytics delivered through a public cloud experience.
For the SAP Digital Boardroom solution, which offers executive decision makers ease and elegance in accessing company data in real time, we released new industry-specific and LoB-specific content for consumer products, chemicals, engineering, construction, operations, and public sector, as well as HR, finance, and marketing LoBs.
Reinventing Business with the Internet of Things and Machine Learning
There is no topic that typifies the digital transformation more than the Internet of Things (IoT). The IoT is a network of physical objects with embedded sensors to detect their environment and interact with business processes and systems. This builds a foundation for entirely new business models and completely digitized, connected businesses. Intelligent sensors, ubiquitous connectivity, and unlimited data storage are driving innovation and leading to a deeper integration of people, processes, data, and things – in one connected world.
Our IoT solutions, now marketed under the new SAP Leonardo brand, help companies digitally transform their manufacturing, logistics, and asset management processes and respond to the needs of a digital business in a highly individualized, consumer-driven economy. We strive to become a trusted partner for IoT that helps our customers link sensor data with business processes and thereby add value. With our end-to-end SAP Leonardo solutions for connected logistics, connected manufacturing, and connected assets, for example, we offer a comprehensive portfolio of standard IoT software, both cross-industry and industry specific. Furthermore, in November 2016, we announced the SAP IoT Application Enablement toolkit, providing services that allow our customers to build their own IoT applications.
Research and Innovation – Innovating for Future Growth
With businesses shifting, leading our customers through change is more important than ever before. We do this every day by empowering our employees and collaborating with our customers to develop world-class software and next-generation solutions. We further strengthened our global research and development (R&D) efforts in 2016 by investing in our SAP Labs network and expanding our SAP Innovation Center locations in India, Israel, and the United States.
Through the SAP Innovation Center concept, we explore unconventional ideas and develop inspiring proofs of concept in a startup-like environment. We strive to open up new markets for SAP software and accelerate the integration of emerging technologies into our core products. Some of these innovations include:
- Machine learning – Making all existing SAP solutions intelligent, bringing machine-learning services and APIs to our platform, and building intelligent business solutions in new and adjacent markets. To emphasize the importance of this topic, we have introduced the new brand SAP Clea that represents our entire machine learning portfolio.
- Blockchain – Exploring the potential of digital finance to radically change how business transactions are conducted in the future and its impact on existing products and innovation potential of blockchain across industries.
- Future enterprise applications – Enabling companies to successfully lead the next economic revolution by developing game-changing business applications to process intangible assets, provide contextual user assistance, and manage new business models.
We draw on the ideas of customers, partners, startups, academia, and, most importantly, our own employees. We want to foster organic innovation and support the transformation of great ideas into profitable business.
Investing in Research and Development
SAP’s strong commitment to R&D is reflected in our expenditures (see figure below).
In 2016, our non-IFRS R&D expense as a portion of total operating expenses increased from 18.3% to 18.4% year over year. Our IFRS R&D expense ratio increased from 17.2% to 18.0%. At the end of 2016, our total full-time equivalent (FTE) headcount in development work was 23,363 (2015: 20,938). Measured in FTEs, our R&D headcount was 28% of total headcount (2015: 27%).
Total R&D expense not only includes our own personnel costs but also the external cost of work and services from the providers and cooperation partners we work with to deliver and enhance our products. We also incur external costs for the following:
- Translating, localizing, and testing products
- Obtaining certification for products in different markets
- Patent attorney services and fees
- Strategy consulting
- Professional development of our R&D workforce
SAP actively seeks intellectual property protection for innovations and proprietary information. Our software innovations continue to strengthen our market position in business solutions and services. Our investment in R&D has resulted in numerous patents. As at December 31, 2016, SAP held a total of more than 8,000 validated patents worldwide. Of these, 841 were granted and validated in 2016.
While our intellectual property is important to our success, we believe our business as a whole is not dependent on one particular or a combination of patents.
Making Digital Transformation Possible with SAP Digital Business Services
SAP offers a comprehensive portfolio of services and support designed to help our customers deploy their software faster and more efficiently – so they can focus more on innovations and realize faster, greater ROI. We provide tailored support to our customers to help them run live in the digital economy.
Through our SAP Digital Business Services unit, SAP aims to standardize services, not recreate them each time – helping companies and organizations reimagine their businesses in the new economy using a digital business framework.
We are accelerating the realization of the digital enterprise with game-changing engagements for predictive maintenance and warranty, analytics to manage Big Data, and connected intelligent manufacturing, among others.
Innovations from SAP Digital Business Services
SAP Digital Business Services offers an entire portfolio of services. Some of our top innovations in 2016 to help customers transform to a digital business include:
- SAP Value Assurance service packages for SAP S/4HANA
- Latest generation of SAP Solution Manager and SAP Model Company
- Next-generation support
- SAP Digital: Expanding the reach of SAP Store and messaging services
SAP Value Assurance Service Packages
Our SAP Value Assurance service packages for SAP S/4HANA cover all project phases and scenarios to help customers migrate from SAP ERP to SAP S/4HANA. This includes:
- System conversion
- Landscape transformation
- New implementations
- On-premise, cloud, and hybrid deployment options
The approach consolidates services and embedded support in four distinct phases:
- Plan and safeguard – Defining the implementation strategy, including dependencies and prerequisites for the target architecture
- Technical implementation – Focusing on the technical aspects of implementation, including data and system migration, high availability, and disaster recovery
- Migrate and implement – Implementing functions with preconfigured setup and ready-to-use business process templates, and analyzing operational impact
- Innovate and optimize – Expanding the context of innovation beyond the digital core to reimagine business models across the enterprise
The packages utilize the SAP Activate methodology, an innovation adoption framework that combines SAP Best Practices packages, implementation methodology, and guided configuration to help streamline deployment.
Partners also play a key role in innovation adoption. Our open engagement approach has motivated many of our larger services partners to focus more on establishing SAP S/4HANA as the digital core.
SAP Solution Manager and SAP Model Company
SAP Solution Manager manages SAP software implementations from cloud to on premise and hybrid, and is currently rolled out as the delivery platform for SAP Digital Business Services. It addresses both IT and business needs.
The solution gives customers real-time transparency, automation, and control to adopt and manage innovations. Process experts and solution architects can explore new industry models earlier, accessing all SAP Best Practices packages.
We also offer a new modeling environment. SAP Model Company is an accelerator service that helps simplify innovation adoption. It combines standard SAP software, SAP Best Practices packages, SAP Rapid Deployment solutions, and content from SAP Activate. Customers can develop repeatable implementation scenarios and access the latest innovations for their future projects. It helps to decrease effort and ensure project success on time and within budget. The service enables customers to accelerate implementations, reduce total cost of ownership, and get up and running quickly.
It is a ready-to-use solution that supports critical decision phases such as discovery and prototype. We provide the full system landscape with detailed business content and documentation and help lower time to value with versions specific to industries and lines of business.
Traditional businesses are becoming digital enterprises. With more business processes “running live,” product support must be less reactive and much more proactive, predictive, and available at any moment; in other words, live support.
Our product support has implemented a next-generation support approach that includes real-time support. Named Expert Chat, this live support channel offers direct access to our experts, available for the majority of our solutions. Moreover, a universal, toll-free phone number harmonizes interaction with support across almost all of our products. We also offer customers a way to search for answers to product-related questions, by making knowledge located within SAP searchable using Google. Automating tasks with intelligent, context-sensitive tools provides customers with solutions proactively.
Customers also demand a seamless, omnichannel support experience. We plan to address this by implementing functions such as built-in, mobile, and social media-enabled support.
In addition, we launched an SAP Preferred Care offering as a premium support option for on-premise customers transitioning to digital business models. It complements the already existing SAP Preferred Care Cloud offering. The offering is an enhancement to our foundation support offerings, namely SAP Enterprise Support, and includes:
- Advanced service-level agreements
- Additional services
- Dedicated contacts
End users can buy both SAP and partner offerings using one-click contracts and digital payments by credit card or PayPal. Customers can discover, try, buy, use, and renew solutions in a simple online interaction. In 2016, customers from 95 different countries placed more than 55,000 orders digitally.
At the same time, SAP also provides a wide variety of intelligent, interconnected messaging and communication services that reach 97% of the world’s mobile subscribers and connect billions of things. Top social media companies rely on SAP solutions to reach their customers worldwide. In 2016, more than 350 billion messages passed through our networks.
We are incubating several new initiatives to more rapidly grow our digital business and expand into new areas – for example, integrating messaging services into our own applications.
A Partner on the Journey to Digital Transformation
SAP will continue to support our customers’ digital transformation through innovative software, ongoing R&D, and proactive services. By reimagining our business suite and providing world-class software, we empower businesses to continue to succeed in the new digital economy. Together, we are a force that helps further economic development, social progress, and minimizes environmental impact – and makes the world run better.