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Dear Stakeholders,

Thank you for investing your time in the SAP Integrated Report 2018. In this experience, you will find a comprehensive assessment of a strong growth company. For seven years now, we have measured ourselves in a holistic fashion. This report is to empower you, our stakeholders, to make an informed judgement about the quality and sustainability of SAP.

What we accomplished in 2018 is the latest in our track record of innovation and growth. This does not happen by accident. On the contrary, it reflects the talent, dedication, and professional excellence of our customers, partners, and employees around the world.

As CEO, I can tell you that I am proud of SAP, honored by the opportunity to represent this company, and highly optimistic about our ability to help the world run better and improve people’s lives far into the foreseeable future.

Earning Your Trust

Trust is the ultimate human currency.

This is one reason our strong performance in 2018 means so much to us. We made promises and we kept them. Our cloud revenue is now larger than our software revenue and it became a main growth driver in our business, growing at 38% (non-IFRS at constant currencies). We delivered over €24.7 billion in total revenue (non-IFRS) and €7.2 billion in operating profit (non-IFRS) – the most ever. We met or exceeded every aspect of our financial guidance to the capital markets, guidance we increased three times during the year to account for strong momentum.

We have a loyal, committed, and engaged workforce. Ninety-three percent of our employees told us they are proud to work for SAP, which is eight percentage points higher than the industry average. Through our corporate social responsibility initiatives, our colleagues volunteered a quarter of a million hours and reached four million people in 2018 alone. While growing the entire size of the company by 10%, we beat our ambition to shrink our carbon footprint by nearly 5%.

Even as we feel the momentum behind the company, we face the same turmoil in the macro environment that impacts all companies. Our stock reached a record high in September but also came under pressure as world markets experienced a very turbulent final quarter. While we ended 2018 down 7%, the stock still outperformed the DAX index by 11 percentage points. And we are already seeing a return to positive momentum in the early weeks of 2019.

One of the hallmarks of any strong company is the distribution of success to its stakeholders. In this spirit, I am pleased to announce that, pending approval at the Annual General Meeting, SAP will return a dividend of €1.50 per share to shareholders, a 7% increase over last year’s dividend.

Securing Our Future

Looking back, we have always based SAP’s strategy on where the world is going, not where it has already been.

We did this with SAP HANA, a business data platform that shattered the status quo database market. We did this with a new era of applications built on SAP HANA. Now we move to a new and defining chapter in our SAP HANA journey.

This is now, beyond any doubt, an experience economy. Each of us are shaped by our experiences. We have real power not only to express our sentiment but also to actively shape the relationships we have with the institutions around us – public, private, and non-profit.

For SAP, this is the burning question we must help our customers to address.

Throughout our 47-year history, SAP has helped companies operate in a constantly changing economy. Our solutions are industrial-grade, capable of powering the most sophisticated businesses as they help deliver highly complex business models in nearly every country on Earth.

“Experience Management” is a paradigm-shifting category in the business software industry. No longer can enterprises operate without constantly asking “why?” We acquired Qualtrics to help us provide this operational capacity to the individuals our customers are serving.

Why are people frustrated? Why are they loyal? Why are they looking elsewhere?

The answers to these questions will not only pave the road to sustainable business success but they will also help intelligent enterprises recapture the US$1.6 trillion that is currently lost due to customer attrition.

Our stakeholders should expect SAP will reach new heights when experience data (“X”) from the Qualtrics platform joins the operational data (“O”) from 77% of transactions on the SAP platform.

X+O is the essential equation for winning in this experience economy. We expect this highly differentiated offering to drive SAP to grow our cloud revenue more than three times, reaching more than €35 in billion total revenue by 2023, and powering strong operating profit growth.

Confronting Our Challenges

Rather than leave you with the many unique attributes that make us strong, I will close with the candor to tell you where we must be stronger.

SAP is the only truly global business software company. We serve 425,000 customers and counting, worldwide. There is no finish line when it comes to meeting the needs of our growing customer base.

Customers expect SAP to lead more aggressively in the responsible use of artificial intelligence. Even as we embed these algorithms into our applications, we must answer the question of how these use cases will impact the human workforce. We must help leaders in all sectors find the proper balance between human judgement and machine speed, including a comprehensive strategy for worker retraining to address a growing digital skills gap.

Customers expect SAP to be a role model when it comes to compliant business practices and integrity. We on the Executive Board share this belief. Unfortunately, we, like many other companies, have experienced the challenges of non-compliance. Moving forward, even as SAP expands our own internal focus, we strive to help others understand the risks and warning signs. When businesses do not act in accordance with the highest ethical standards, the resulting decline in public trust is harmful for all sides. Therefore, we call for other interested groups to come together to support these values.

Finally, customers expect SAP to do more than celebrate a purposeful vision for our company. They want our solutions to help them be responsible, sustainable best-run businesses. They want our solutions to help them remove bias from the workplace, eliminate unfair labor practices, reduce carbon emissions, and educate a new generation of inspired workers. Underpinning what we do is our support of the UN Sustainable Development Goals, which will help us achieve our purpose and have a positive impact on the world.

You should always expect that SAP’s pride in engineering will continue to propel our products to improve. In all areas where we compete, we will not rest until SAP is #1 or fastest growing.

But beyond our ambitions for profitable growth, you should always expect us to be a humble and hungry company – ever proud about what makes us strong and ever vigilant to confront our challenges.

With your continued trust, not only will we seize the opportunities of the experience economy but we will also do so in a manner befitting the class and character of those who came before us.

I thank you, especially, for standing behind us on this journey.


Very truly yours,

Bill McDermott
Chief Executive Officer

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