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In 1972, five systems analysts
began working nights and weekends to create standard software with
realtime data processing. Twenty-five years
later their vision is a reality: SAP is the world�s market and technology
leader in business application software.
On April 1, 1972 five former
IBM employees founded SAP as Systemanalyse und Programmentwicklung
(�Systems Analysis and Program Development�)
in Mannheim, Germany. Their vision was to develop and
market standard enterprise software which would integrate all business
processes. The idea came to them through
their work as systems consultants for IBM when they noticed that client
after client was developing the same,
or very similar, computer programs. The second part of their vision was
that data should be processed interactively
in realtime, and the computer screen should become the focal point of
data processing.
From a start-up software
vendor to global market leader
Over the course of twenty-five
years, their vision has transformed SAP from a small regional enterprise
into a world-class international company. Today, the SAP Group is the global
market leader in enterprise resource
planning software, and has subsidiaries, affiliates and branch offices
in nearly every industrial nation in
the world. Important milestones in the company's corporate history include
its conversion to a GmbH (a closely-held
corporation) in 1977, the opening of the company's headquarters in Walldorf,
and its conversion into a publicly-held
corporation whose shares are listed on several stock markets.
By changing its structure
to a publicly-held corporation, SAP significantly strengthened its capital
base and laid the foundations for its
employees to enjoy more of a share in the company's success. In the end,
it is SAP�s employees � currently more than
9,000 of them - whose know-how, motivation and performance
have nurtured the company�s progress. And it is their commitment and innovative
drive which will pace the company�s
future success and keep it ahead of the competition.
Over one million R/3 users
Products have played the
central role in SAP's success story. In this area, two milestones stand
out: first, the development and 1979
market release of the R/2 software system for mainframes, and, second,
the R/3 client/server software system
introduced in 1992. Since its debut, the R/3 System use has grown
explosively and now accounts for the lion's
share of SAP product sales. At present, more than one million
end users around the world work with the R/3 System.
The development of SAP products
has continually benefited from major advances in the hardware sector.
Back in 1972, the limited storage capacity
of computers posed one of the biggest challenges. In those days,
mainframes only had 500 kilobytes of storage capacity. Slow data input
and output meant that only partial
applications with a limited data volume were feasible. It was against this
technological background that SAP signed
its first customer, the German ICI subsidiary in Östringen.
With the successful implementation
of its initial project, SAP had nine employees and, at the end of its
first fiscal year, posted a profit on revenues
of DM 620,000. In the second year of operation, two local businesses
� the tobacco and cigarette manufacturer Roth-Händle and the pharmaceutical
company Knoll - selected the newly
developed SAP Financial Accounting (RF) System. This system quickly
earned a reputation as an excellent standard
package and installations expanded to 40 customers. But product
development did not slow on this success, and a second standard product,
the Materials Management (RM) System,
with modules for purchasing, inventory management and invoice verification,
soon followed. The benefits
of SAP's integration philosophy showed through, with data from Materials
Management flowing straight
into Financial Accounting.
SAP moves to Walldorf
In its fifth year of operations,
SAP became a GmbH (a closely-held corporation) and took on a new name:
Systeme, Anwendungen, Produkte in der Datenverarbeitung ("Systems, Applications,
Products in Data Processing"). Revenues
were now close to DM 4 million, and the number of employees had grown to
25. In 1977, SAP moved its offices
and headquarters to Walldorf. In the same year, it signed its first two
foreign customers, two companies from Austria.
Just one year later, the customer base had grown to 100 and
the number of employees stood at 50. SAP had also introduced another central
module of the SAP System � Asset Accounting
(RA). At the same time, through the development of a French version of
the accounting module, SAP made additional
steps toward the international markets.
By the end of the 1970s,
new generations of powerful computers provided the framework for a
comprehensive software system, and a major
step in the development of SAP software - the R/2 System � was
taken in 1978. In the same year, as sales headed toward the DM 10 million
milestone, SAP began operation of its
own computer center in Walldorf which, when completed in 1980, united development
teams under one roof. That year SAP�s software
became even more attractive with the addition of order history
to the product range. At the end of 1980, 50 of the 100 largest industrial
companies in Germany
were SAP customers.
R/2 System goes international
SAP�s close relationships
with customers led to continuous enhancements in the existing program
modules, while important new additions were
made, such as the Cost Accounting (RK) System. The R/2 System
was now ready for the international market. New computers with drastically
improved price/performance ratios helped
expand the customer base, and SAP raised its profile still further by
appearing at the Systems trade fair in Munich
- the company's first-ever presence at an industry trade show.
In 1982, SAP celebrated its
tenth anniversary, with sales soaring 48% to over DM 24 million. By the
end of the year, 236 companies in Germany,
Austria and Switzerland were working with the SAP standard programs.
Sales continued to climb in the following year, increasing by 45%.
In 1984 SAP took additional
steps into the international arena with the founding of SAP (International)
AG in Switzerland, whose focus was to increase
sales of the R/2 System in international markets. Development
teams began work on two new applications, Personnel Management and Plant
Maintenance, while the Production Planning
and Control System was installed at its first pilot customers.
1985 was characterized by
further expansion. The Walldorf headquarters had grown to 10,000 square
meters of space, while at the Swiss subsidiary
a new headquarters was occupied. SAP systems were now in
use in most European countries, and SAP began to penetrate markets outside
Europe - with customers in South Africa,
Kuwait, Trinidad, Canada and the US.
The DM 100 million sales
mark exceeded
SAP continued to pursue
international growth with the founding in 1986 of SAP�s Austrian subsidiary
SAP Österreich Ges.m.b.H. in Vienna.
At the parent company, SAP GmbH, the capital stock was increased
from DM 500,000 to DM 5 million. The largest single hardware investment
to date was made in Walldorf with the
installation of an IBM mainframe costing DM 7 million. The year's sales
topped DM 100 million, and SAP exhibited
at CeBIT, the world's largest IT trade fair, for the first time.
The 15th year of the company's
history was again characterized by powerful growth. Branch offices were
opened in Munich and Hamburg, and subsidiaries
established in four European countries - the Netherlands,
France, Spain and the UK. Staff grew to 750, and sales more than doubled
to DM 245 million, with 850 companies
now using SAP's software systems. In 1987, SAP announced its strategy for
a new generation of software, and the R/3
System was born.
SAP goes public
SAP continued to grow in
1988 with the international sales network strengthened by the establishment
of subsidiaries in Denmark, Sweden,
Italy and the US. Other events included: the founding of SAP Consulting
GmbH as a joint project between SAP and the consulting firm Arthur Andersen;
the opening of an International Training
Center in Walldorf; and the welcoming of Dow Chemical as SAP�s 1,000th
customer. However, the most significant events
of the year were the increase of SAP�s capital stock from DM
5 million to DM 60 million, the subsequent conversion of SAP GmbH into
a stock corporation, SAP AG, and the
flotation of SAP shares on the stock market. SAP shares were quoted on
the securities
exchanges in Frankfurt and
Stuttgart.
During the next year, 1989,
SAP shares began trading on the Zurich stock exchange. SAP expanded its
alliance and strategic cooperation approaches
by taking a majority investment in TOS GmbH in Freiberg. Through
the "International User Conference" in Lausanne, Switzerland, and the first
"SAPPHIRE" user conference in North
America, SAP demonstrated its solid commitment to direct international
customer contact. This crucial commitment
was to become more and more important to SAP�s success in the coming
years.
Over 1,000 employees
SAP (International) soon
grew to twelve subsidiaries, including Canada, Singapore and Australia.
SAP's growing profile in 1989 was evidenced
by a number of events: the large number of participants attending
the first Annual Stockholders' Meeting, the
strong employee growth to more than 1,000, and the expansion
of the customer base. Recognizing this success manager magazin named SAP
"Company of the Year" � a distinction
SAP would receive twice more in the next few years.
In 1990, SAP's capital stock
was expanded to DM 85 million with the issue of preference shares. SAP
strengthened its commitment to small- and
medium-sized businesses by an investment in the software company
Steeb and the acquisition of software vendor CAS. In the same year, SAP
and Siemens Nixdorf founded SRS GmbH
in Dresden, gaining a firm foothold in the East German market. Sales grew
strongly to over DM 500 million, and
the number of staff grew to 1,700.
SAP develops Russian R/2
version
Strong growth continued
unabated in 1991. The acquisition of Steeb GmbH was completed and its
activities were merged with CAS to form STEEB-CAS
GmbH, creating a high-caliber software company with
an attractive product offering for the small- and medium-sized company
market. With SAP�s Eastern European
business developing quickly, SAP collaborated with a local Russian software
company to develop an R/2 version in
Russian. The first Japanese installation of SAP software was successfully
completed. At the end of the fiscal year,
the SAP Group boasted 2,225 customers in 31 countries and
sales of more than DM 700
million � an increase of over 40 percent. The company had more than 2,500
employees.
In its twentieth year, SAP
opened a new Development and Sales Center in Walldorf. The two-year project
cost roughly DM 140 million and represented
the company's largest single investment to date. In preparation
for additional development, SAP�s share capital was expanded by DM 15 million
to DM 100 million through the issue
of 300,000 preference shares. SAP was now firmly established as a global
company, with South Africa, Malaysia and Japan
the newest additions to its 15 subsidiary companies. By 1992,
almost half of the DM 831 million in product revenues were being generated
outside Germany, and the availability
of the software in 14 different languages was adding significantly to its
attractiveness.
Shipment of the client/server
system R/3
With the R/3 System release
in mid-1992, SAP began to penetrate the mid-size market, and into branches
and subsidiaries of large companies. The release
of the R/3 client/server system was the most significant event
in SAP�s history and started a record of growth that even SAP�s most optimistic
planners had not predicted.
SAP took top position among
German software vendors in 1993. On an international scale, the company
moved to 7th place among software companies,
establishing a clear lead in the global business applications
software market. Sales surpassed the important DM 1 billion mark for the
first time in 1993, and the global
customer base stood at 3,500 companies. SAP made an investment in iXOS
Software GmbH with the aim of developing
and marketing graphical user interfaces and optical archiving of
documents.
New development center
in Foster City, California
Releases 2.0 and 2.1 provided
R/3 users with even more functionality. With the R/3 System already
running on six hardware platforms, SAP and
Microsoft signed an agreement to port R/3 to Windows NT. Other
events included: the founding of SAP�s 18th subsidiary in the Czech Republic,
the establishment by SAP America of
a development center in Foster City in Silicon Valley, California, and
the introduction by SAP Japan of a
Kanji version of R/3.
1994 was yet another record-breaking
year with sales jumping 66% to over DM 1.8 billion. By the end of
the year, SAP employed more than 5,000 staff
worldwide, and 200 of the more than 4,000 customers were using
the R/3 System in production operation. A Swiss customer was the first
customer to go live with R/3 on Microsoft�s
Windows NT � a mere four months after the platform became available. Since
its rollout in 1992, R/3 had now been
installed more than 1,000 times. SAP development received ISO 9000
certification, and R/3 Release 2.2 was completed
on schedule and included a wide range of enhancements in
Logistics. SAP continued to expand its sales organization and strategic
alliances. In Germany, SAP acquired
a 52% stake in DACOS Software GmbH with the aim of developing an integrated
software solution for the retail industry.
The 19th subsidiary opened in Mexico City.
The Annual Stockholders'
Meeting agreed to a DM 400 million capital increase out of retained earnings,
bringing total capital to DM 500 million.
The resulting 1:4 stock split was positively received by the market
and led to a significant increase in stock price levels.
Microsoft chooses R/3
More than 6,000 companies
of all sizes were among SAP customers in 1995, some two-thirds of which
solved their IT tasks using the R/3 System.
During the year Microsoft joined IBM as an R/3 customer from
the high-tech sector.
In 1995, R/3 became the largest
source of overall revenues, with a DM 1.7 billion share of total sales
of DM 2.7 billion. Growth prospects
were strengthened still further with the new R/3 Release 3.0, a
functional and technical milestone in R/3
development. With this version the important areas of production
planning and control were now comprehensively covered. Another technical
addition was the availability of R/3
on the widely used IBM AS/400 platform.
The indirect sales channel
concept was introduced in Germany, with SAP forming partnerships with
value-added resellers so as to better support
small- and medium-sized businesses. A new Service and Support
Center opened in Walldorf with room for some 750 employees. SAP now employed
more than 7,000 staff.
Global profile: SAP represented
in 40 countries
In 1995, SAP further increased
its international activities with new subsidiaries formed in China,
Argentina, Brazil, Korea, Poland, Russia and
Thailand. SAP was now represented in over 40 countries by subsidiaries,
branch offices or partner companies. An industry solution for the process
industry (eg., chemicals, pharmaceuticals,
food and beverage industry, and semiconductors) was announced in the US.
With 1,400 stockholders and
guests, the number of attendees to the 1995 Annual Stockholders' Meeting
was more than triple the 1994 figure, and
the ASM approved changing the par value of SAP shares from DM
50 to DM 5. Shortly thereafter SAP entered the German stock index (DAX).
Both events had a positive effect on
share prices.
Sales reach DM 3.7 billion
in SAP's anniversary year
SAP's success continued
into its 25th year of operations, with sales exceeding DM 3.7 billion.
Over the course of its 25-year history,
SAP showed that business processes can be modeled in a standard way
across and within industry sectors. When the
IT industry developed a flexible and cost-effective client/server
architecture, SAP provided its customers with the right product at the
right time - the R/3 client/server
system.
R/3 becomes Internet-enabled
The success of R/3 has propelled
SAP to the top of the global software market. IT is undergoing yet
another revolution with the advent of the
Internet, and SAP is again there with a solution: the latest version
of R/3 provides the first comprehensive, Internet-enabled business application
package. Release 4.0, which is already
in development, further increases the attractiveness of the R/3 System
by making it more user-friendly. Small
and mid-sized businesses should especially welcome this development. The
R/3 System is here to stay, and users
can look forward to its continuing enhancement.
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