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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 (SMB). The latter fact is a more recent departure from the company's previous focus on large organizations.
According to SAP, 75% of all global business transactions come in contact with an SAP system. The company offers on-premises, cloud and hybrid deployment models, with cloud computing options being the focus for the company's future. On the Forbes 2016 list of "The World's Biggest Public Companies," SAP was ranked the third-largest software and programming company, behind Microsoft (1) and Oracle (2).
SAP's ERP system enables companies to run their business processes, be they accounting, sales, production, human resources or payment, in an integrated environment. The integration ensures that information flows from one SAP component to another without the need for redundant data entry, and it helps enforce financial, process and legal controls. SAP's ERP system also facilitates effective utilization of resources (the R in ERP), be it machines, production capacities, manpower or other assets of an enterprise (the E in ERP) through detailed planning (the P in ERP) of resources.
History of SAP
SAP was started in 1972 by five former IBM employees in Mannheim, Germany. The original name for SAP, Systeme, Anwendungen, Produkte, is German for "Systems, Applications and Products." The original idea for SAP was to provide customers with the ability to interact with a common corporate database for a comprehensive range of applications in real time.
In 1973, SAP released R/1, a financial accounting system. R/1 ran on IBM servers and DOS, and it had a single-tier architecture in which presentation, applications and data were on one platform.
In 1979, SAP released R/2, a mainframe system that provided real-time data processing across accounting, manufacturing, supply chain and human resources. R/2 used a two-tier architecture, where presentation was on one platform and applications and data were on another. R/2 helped power SAP's growth, and the vendor expanded its customer base to about 200 companies.
In 1992, SAP released R/3, which represented a switch from mainframe computing to the client-server model, and from a two-tier to a three-tier architecture, in which presentation, applications and data were housed separately. R/3 was a critical product for SAP that launched the company onto the world stage.
In 1999, SAP launched mySAP, which marked a new strategy for the company of focusing on combining e-commerce software with the applications in R/3. One year after R/3's release, SAP partnered with Microsoft to port the new version to Windows NT. By 1997, SAP employed 13,000 people.
In 2004, the company launched SAP NetWeaver, and it reported that more than 1,000 customers acquired the application development platform that year. Also in 2004, the successor to R/3, the SAP ERP system (or SAP ECC, for SAP ERP Central Component) was released. Customers already using R/2 or R/3 were still supported, but new customers were required to implement SAP ERP. By 2005, SAP was generating $8.5 billion, with upwards of 35,800 employees around the globe.
In 2006, the company claimed hefty revenue from SAP Business All-in-One and SAP Business One, its SAP ERP systems for SMBs.
In 2011, the company launched SAP HANA, an in-memory database platform. HANA was a major development project for SAP, and an important new strategic direction for the vendor, which has said it intends HANA to take the place of the traditional databases SAP has used for its business applications. SAP has offered HANA as a deployment option for Business Suite, and, in 2015, released S/4HANA, an ambitious rewrite of Business Suite optimized for the HANA platform.
As of this writing, Bill McDermott is CEO of SAP, a position he has held since May 2014. In the four years prior, McDermott was co-CEO with Jim Hagemann Snabe. Meanwhile, company co-founder Hasso Plattner is a member of the SAP Supervisory Board and continues to help lead the technology strategy for the company.
SAP has subsidiaries around the globe, with six geographic regions. In 1988, it changed from a private, limited-liability company to the publicly traded SAP AG (with AG changing to SE in 2014).
The company had first established operations outside Germany in the mid-1980s, but began a global expansion in earnest in the later part of the decade. As part of this, the company established SAP America in Pennsylvania in 1988, eventually moving to its permanent headquarters in Newtown Square, Pa.
At first, the company staffed SAP America with some of its German managers. However, it soon became clear that a staff more aligned with American culture would be more effective, and the company began hiring staff from the United States. SAP America's profits quickly grew with the release of R/3 in 1992, and it soon became the most profitable subsidiary, growing from two U.S. offices to 20 between 1992 and 1995. Today, SAP America serves the largest SAP user base in the world.
List of SAP modules and developing products
The SAP ERP system, or SAP ECC, is the collective term for SAP's functional and technical modules that enable enterprises to manage business processes through a unified system. ECC is the on-premises version of SAP, and it is usually implemented in medium and large-sized companies. For smaller companies, SAP offers its Business One ERP platform.
SAP ERP has different main modules, which are separated into functional modules and technical modules, each of which has submodules.
SAP's functional modules include:
- Human Capital Management (HCM)
- Production Planning (PP)
- Materials Management (MM)
- Project System (PS)
- Sales and Distribution (SD)
- Plant Maintenance (PM)
- Financial Accounting (FI)
- Quality Management (QM)
- Controlling (CO)
SAP also has cross-application components, which can be implemented with any of the main modules.
Some of the cross-application components are:
- Document Management System
- Product Lifecycle Management
SAP technical modules include:
- SAP NetWeaver
- IS (Information Systems) Management
- XI (Exchange Infrastructure)
- Business Intelligence (BI)
- Business Warehouse (BW)
- SAP HANA
Further, SAP also has industry-specific applications that support business processes unique to a particular industry. Some of these applications are:
- SAP for Utilities
- SAP for Insurance
- SAP for Oil and Gas
- SAP Healthcare
SAP Business Suite is a bundle of business applications that provides integration of business and processes, as well as industry-focused functionality. It has SAP ERP as its foundation, plus modules for customer relationship management, product lifecycle management, supply chain management and supplier relationship management. SAP customers can choose to run Business Suite on SAP HANA, its in-memory platform for processing large volumes of data in real time.
S/4HANA is the vendor's in-memory version of the Business Suite ERP platform, and it is run on HANA. S/4HANA is meant to reduce complexity, according to SAP, and to replace SAP ECC, eventually.
SAP Fiori is a line of SAP apps -- the first 25 were released in 2013 -- that the company intends to use as its predominant user experience and user interface model going forward. Fiori is meant to address criticisms of SAP's user experience and UI complexity. A number of Fiori apps run exclusively on S/4HANA, and the two are intended to more closely intertwine as they evolve.
A note about the term modules: In ECC, the correct term is component. However, due to the continued prevalence of R/3, the term module is still in widespread use. ECC's components are often interchangeably referred to as modules, with modules belonging to R/3 and components belonging to ECC, but both offer the same functionality.
SAP made a key decision in 2001 to open up its proprietary technology and make it programmable via SAP NetWeaver, which received a lot of industry attention as the first fully interoperable, web-based, cross-application platform that could be used to develop not only SAP applications, but others, as well.
The platform enables the use of standards-based web services to create new applications for business needs. SAP NetWeaver is the technical foundation and main computing platform of SAP, and it provides a set of tools for building and integrating applications from a number of disparate sources and locations via service-oriented architecture middleware.
SAP Labs and acquisitions
SAP says its primary focus on growth rests on internal innovation by developing and improving its own products. As a step in that direction, the company created SAP Labs, which are research and development locations that develop and improve core products. These are located in high-tech clusters around the world, such as in Bangalore, India, and Palo Alto, Calif.
Beyond organic growth, SAP has executed on an aggressive acquisition strategy to fill its technology gaps. Since 1996, the company has made more than 60 acquisitions. A major focus for the company in recent years has been building its cloud computing capabilities and enabling greater mobility. Acquiring companies with such technologies has helped to build those capabilities. Here are six acquisitions that serve as examples:
- Concur Technologies, 2014, online travel and expense management software as a service
- Fieldglass, 2014, cloud-based contingent labor and services
- Hybris, 2013, e-commerce, part of the SAP Customer Engagement and Commerce suite
- Ariba, 2012, cloud-based B2B marketplace
- SuccessFactors, 2011, cloud-based human capital management
- BusinessObjects, 2007, business intelligence
SAP User Groups
An important part of SAP's information dissemination and engagement has been its user groups. These are independent, not-for-profit groups designed to help educate members, create customer involvement, give voices to users in influencing SAP strategy and provide networking opportunities. Here, SAP employees and users can meet and share information, experiences and lessons learned.
Arguably more important, SAP hears user feedback in both the technical areas and the functional areas. User groups are organized by region across the globe, with ASUG (Americas' SAP Users' Group), being the largest.