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Strategy and Business Model

Impact Through Innovation

SAP’s vision is to help the world run better and improve people’s lives. We strive to make our world a better, more sustainable place and help solve some of its most complex problems. Our innovations give us the power to help tackle these issues by giving our customers, partners, and consumers the tools they need to have an impact.

We execute on our vision by empowering our customers to become digital businesses through SAP technology, so they can address the challenges facing our world today and have an impact in three vital areas:

  • Economy: Economic empowerment comes from purpose-driven work. SAP software and technology enables customers to innovate and build strong industries and infrastructure and to protect the privacy of individuals and organizations.
  • Society: Health, education, and public safety are critical for a vibrant society. SAP software and technology is addressing complex challenges around disease prevention and detection, as well as providing solutions for smarter government and smarter cities.
  • Environment: Climate change touches everyone and will impact the lives of future generations. SAP software and technology is helping our customers make the world more energy efficient, and drive more sustainable supply chains around the world.

The United Nations has defined 17 Sustainable Development Goals (SDGs) to transform the world’s economy, society, and environment. These goals are a universal call to action to end poverty, protect the planet, and ensure that all people enjoy peace and prosperity. We consider the most relevant of these goals in the context of our own vision and higher purpose and they inspire us to achieve this vision.

 

Achieving the Vision

Supporting our customers’ digital transformation

To execute our vision, we are helping customers meet the challenges of today’s changing world, and at the same time, enabling them to have a positive impact across the economy, society, and the environment.

Technology is transforming both our society and the way we do business. People and things are connected like never before. Entire industries are being disrupted by innovations that seemed unimaginable only a few years ago. Technology trends such as cloud computing, Big Data, the Internet of Things (IoT), and artificial intelligence go hand in hand with social trends that are changing how we live and work.

Organizations need to digitally transform their business processes and business models to be able to succeed in today’s marketplace. They need to become agile organizations that are laser focused on driving customer value. They also must become data-driven and run their business on real-time information to react to market and customer demands.

By providing a technology platform for innovation and digitalization, we help our customers with the challenges of digital transformation. Our solutions enable businesses, governments, and non-profit organizations in more than 180 countries to become data-driven “live” businesses.

Our platform leverages existing SAP assets that are complemented by new cloud capabilities and the real-time applications available in our next-generation business suiteSAP S/4HANA. Our solutions and services – combined with the talent and expertise of more than 84,100 colleagues and a broad global ecosystem of partners – puts us in a unique position to enable our more than 345,000 customers to fulfill their goals.

We want to build on the trust of our existing customers and earn the trust of new customers. For more information, see the Customers section.

Executing on our strategy

In the past years, we have built our success in the business applications market by expanding our product portfolio to help companies meet the needs of the digital economy. We have organically innovated with groundbreaking technology such as SAP HANA and software such as SAP S/4HANA. We have also expanded our portfolio through acquisitions by integrating valuable assets in the cloud and business network spaces.

In 2016, we have increased our focus on innovation as it is the key to long-term success. Our strategy to be the most innovative cloud company powered by SAP HANA, will help us deliver the digital innovation that our customers need. To execute on this strategy, we are focusing our efforts on the following key areas:

  • Continue to develop market-leading applications
  • Scale our platform as the innovation platform for our ecosystem partners
  • Invest in disruptive technologies
  • Recruit and retain the right talent

Continue to develop market-leading applications

Our core ERP software is the historic foundation of our strength. To maintain our market leadership position as this market rapidly shifts to the cloud, we will continue to innovate and offer the agility and flexibility our customers require.

We will continue to deliver market-leading applications for ERP, whether in the cloud or on premise. Further, we will continue to develop best-in class, line-of-business (LoB) cloud applications combined with real-time analytics, IoT capabilities, and industry add-ons. Finally, we will leverage our expertise to deliver solutions to help small businesses and midsize companies be successful.

Scale our platform as the innovation platform for our ecosystem partners

We built an open cloud platform with cloud application programming interfaces (APIs), which means the platform can communicate with multiple sources to support a strong ecosystem – allowing developers from companies of all sizes to extend our applications or create new solutions for the digital economy. Moreover, as the rapidly growing data management and database market moves to the cloud, our cloud platform offers companies planning, predictive, visualization, and mobile capabilities.

We will continue to deliver transformational innovations in the platform, database, and analytics space. We want developers in our entire ecosystem and our customers to turn to SAP as their reference cloud platform and API hub. Finally, we want to ensure that security remains a trusted feature of all SAP platforms and applications.

Invest in disruptive technologies

To enable sustainable success, we must prepare for the future. We will continue to incubate disruptive technologies across a number of initiatives. We have begun incubating new businesses using an “open innovation” approach under the umbrella of the SAP.io program with focus on both internal and external startups. We are aggressively investing in making our business applications “intelligent” with machine learning. We are investing in delivering personalized medicine through a connected health platform – aligned with our vision of improving society and healthcare. At the same time, we continue to create reliable security solutions across all of our products.

For more information about these investments, see the Products, Research & Development, and Services section.

Recruit and retain the right talent

We cannot bring innovations to our customers without capable, driven employees. As we strive to be the best place to work in the enterprise software industry, we look to a diverse and engaged workforce to drive innovation and value for our customers. Recruiting the right talent and unleashing their innovative power is as crucial for SAP as continuing to develop the talent of existing employees to allow them to realize their full potential.

For more information, see the Employees and Social Investments section.

Keeping a balanced focus on growth

We take a balanced approach on how to grow. We will continue to focus on organic investments in technology and innovations to drive our short-term and midterm growth ambitions. We will continue to look at unleashing the full potential of our employees’ talent as well as strategic partnerships with our ecosystem to foster innovation.

Additionally, we may also acquire targeted “tuck-in” technologies to add to our broad solution offerings and improve coverage in key strategic markets. In 2016, SAP made the following smaller tuck-in acquisitions:

  • Altiscale, a company providing high-performance, scalable Big Data-as-a-service (BDaaS) solutions, will help SAP accelerate and operationalize the deployment of Big Data in the enterprise.
  • Fedem Technology, a forward-thinking IoT company, will help SAP build next-generation, end-to-end IoT solutions that not only support predictive maintenance but also Industry 4.0 scenarios.
  • Hipmunk, a leader in innovative travel search, will bring a consumer-like experience for business travelers.
  • PLAT.ONE, a leading enterprise-grade IoT provider, will help SAP enhance complex IoT capabilities in SAP Cloud Platform (formerly called SAP HANA Cloud Platform).

Investing in the next generation of technology leaders

For 20 years, through venture capital funds managed by Sapphire Ventures, SAP has supported entrepreneurs that aspire to build industry-leading businesses. Sapphire Ventures currently has over US$2 billion under management and has invested in more than 130 companies on five continents – in growth-stage technology companies as well as early-stage venture capital funds. Sapphire Ventures pursues opportunities in which it can help fuel growth by adding expertise, relationships, geographic reach, and capital. It places a particular focus on companies in Europe, Israel, and the United States.

Additionally, we launched a new SAP.io Fund to focus on strategic, early stage investments aligned with our SAP.io innovation initiatives. This US$35 million fund will focus on “catalyzing” a startup ecosystem that can leverage or enrich SAP data sets, platform technologies, or business workflows. It is operated in partnership with Sapphire Ventures.

For more information about our consolidated investment funds, see the Notes to the Consolidated Financial Statements, Note (34).

Financial Business Model

We derive our revenue from fees charged to our customers for:

  • Support, professional services, development, training, and other services
  • Licensing of on-premise software products and solutions
  • Use of our cloud solutions
  • Activity in our business networks

Measuring Our Success

We believe the most important indicators to measure our success comprise both financial and non-financial indicators:

  • Growth
  • Profitability
  • Customer loyalty
  • Employee engagement

The table below provides an overview of the specific key performance indicators (KPIs) used to measure performance, as well as our goals and actual performance.

Outlook and Results for 2016

 

Strategic Objective   KPI   2016 Outlook*
(non-IFRS, at constant currencies)
  2016 Achievement
(non-IFRS, at constant currencies)
Growth   Cloud subscriptions and support revenue   €3.00bn to €3.05bn   €3.01bn
Cloud and software revenue   +6.5% to +8.5%   +8%
Profitability   Operating profit   €6.5bn to €6.7bn   €6.60bn
Customer Loyalty   Customer Net Promoter Score   25%   19.2%
Employee Engagement   Employee Engagement Index   82%   85%
* The outlook was communicated in January 2016 and raised in October 2016.

 

Outlook for 2017 and Ambitions for 2020

 

Strategic Objective   KPI   2016
(non-IFRS)
  2017 Outlook
(non-IFRS, at constant currencies)
  2020 Ambition
(non-IFRS)
Growth   Cloud subscriptions and support revenue   €2.99bn   €3.8bn to €4.0bn   €8.0bn to €8.5bn
Cloud and software revenue   €18.43bn   +6% to +8%    
Total revenue   €22.07bn   €23.2 to €23.6bn   €28bn to €29bn
Share of more predictable revenue*   61%       70% to 75%
Profitability   Operating profit   €6.63bn   €6.8bn to €7.0bn   €8.5bn to €9.0bn
Customer Loyalty   Customer Net Promoter Score   19.2%   21% to 23%   35% to 40%
Employee Engagement   Employee Engagement Index   85%   84% to 86%   84% to 86%
* Support and cloud subscriptions – share of total revenue

 

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