INTRODUCTION Frankfurt and Stuttgart stock exchanges and then the

INTRODUCTION

SAP  “Systems, Applications & Products in Data Processing” is a
German  software corporation that makes enterprise software to
manage business operations and customer relations. SAP is headquartered
in Germany, with offices in 180 countries and more than 335,000 customers.  Since 1972 they have been a leader in business
software but failed to relate to their clients changing needs due to their
focus only on the development of its product while allowing external
consultants to install and service its product with its customers.  SAP also had a product that was very rigid
and unable to be customized for its customers specific needs. Rather than
continue to do business in that way, SAP had to find ways to improve its
customer relationships and meet their needs as well as manage its product to be
more agile to suit customer differences.

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BACKGROUND

In 1972 Xerox wanted out of the
computer industry and asked IBM to migrate its business
systems to IBM technology.  This gave IBM
the rights to SAP.  Five IBM engineers
from Germany were working on a system based on this software.  They were told that the project was going to
end and that’s when they decided to leave IBM and start their own company.

 

Their
company was titled Systemanalyse und
Programmentwicklung (“System Analysis and Program Development”)
and they began developing programs for payroll and accounting. They produced
SAP R/98 the following year which used centralized data storage and improved
data maintenance.

 

Over
the next several years they launched SAP R/2 which included materials
management and production planning which was followed by SAP R/3. The
development of SAP’s internet strategy with mySAP.com redesigned the concept of
business processes and, R/3 was replaced with t SAP ERP Central Component
(ECC). Which is still in use with the most updated package update in 2016.   ERP stands for Enterprise Resource Planning
related to all the core processes needed to run a company: finance, HR,
manufacturing, supply chain, services, procurement, and others. ERP integrates
these processes into a single system and offer visibility, analytics, and
efficiency across every aspect of a business. This allows a business to make
data-driven decisions and manage performance.

 

SAP went public in 1988 and shares
were sold on the Frankfurt and Stuttgart stock
exchanges and then the
German stock index, and Dow Jones. Sap is now  one of the world’s leading software companies with
a market capitalization of $87 billion, placing it behind Oracle Corp. but
ahead of Salesforce.com in
terms of market capitalization. In 2016, SAP had annual revenues of about $23
billion.

 

ALTERNATIVES

Some of the key problems and issues
for SAP was
the rising competition from rivals, specifically Oracle and Salesforce. With heavy
competition from the two biggest cloud computing companies in the world, SAP
managed to maintain largely stable revenues and margins but needed better ways
of doing business in order to stay competitive. 
This meant facing their two major faults, allowing consultants to
install SAP
software systems with their customers and a software product that was not
flexible or customizable.  SAP’s
outsourcing consulting strategy caused them to lose billions of dollars of
revenue that the consulting companies were capitalizing on.  The consulting companies became the experts
and gained the relationships with customers and SAP wasn’t close enough to the
customer to realize their problems or concerns. 
SAP would need to change their way of doing business.  One alternative was to target the market for
small and medium companies verses the large companies that they already focused
on.  SAPs approach to implementations was
very inflexible and they need to find a way to be more ingrained in the
customer experience rather than allowing consultants to build these
relationships with a focus on billable hours. 
Another alternative was to merge into web based/cloud based software
technology. 

 

SOLUTION

Along with SAPS/4HANA SAP reversed
its direction on Enterprise Support and reintroduced its standard support
package for customers. The move to reinstate standard support – at 18 percent
of annual license fees, “will enable all customers to choose the option
that best meets their requirements”, the company said.

 

SAP partnered with IBM and HPE to
sell cloud-based services.  HPE and IBM would
provide infrastructure services to SAP, and SAP would run its SAP HANA cloud
solution on top. SAP announced additional partnerships with Microsoft in order
to give customers tools for data visualization, as well as improved mobile
applications. SAP also acquired Concur for travel and expenses and Fieldglass
for vendor management.  SAP will also
launch a new product line called SAP IoT, which “will combine large
amounts of data from things connected to the Internet with machine learning and
SAP’s real-time database S/4 HANA.  SAP
introduced SAP HANA, Express Edition which is meant to run on personal
computers or on cloud computing platforms for students and other small-scale
developers.

 

SAP has also partnered with Apple to
work on the mobile experience for SAP enterprise customers for Iphone and Ipad .
As part of the partnership, a new SAP HANA Cloud
Platform SDK would
be delivered exclusively for iOS. As a result, developers can build
applications based on the SAP HANA Cloud Platform for the iPhone and iPad. The
partnership was announced in May 2016.

RECOMMENDATIONS

According to its 2016 corporate fact
sheet, SAP serves more than 335,000 customers in 190 countries, of which 80%
are small- and-medium sized businesses. The is believed to be the result of
their change in strategy and departure from the company’s previous focus on
large enterprise organizations. It’s estimated that 75% of all global
business transactions connect to an SAP system.

 

Competition will continue as the
global cloud computing market expands and SAP will have to resort to aggressive
pricing strategies, superior customer service, and advanced technology.  SAP will need to focus on customer
relationship management, marketing & sales software, manufacturing,
warehousing & industrial software, and supply chain management &
logistics software sectors and to target small and medium businesses.

 

To
be successful going forward SAP must stay focused on cloud computing,
flexibility in its product, and consulting with its customers to make SAP the leader
and preferred provider of business software for large, medium and small
companies.

 

 

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