SAP Strengths, Domain Expertise, and Key Differentiators
SAP announced its intent to take Qualtrics public through an initial public offering (IPO) in the United States. SAP intends to remain the majority owner of Qualtrics. SAP’s primary objective for the IPO is to fortify Qualtrics’ ability to capture its full market potential within Experience Management. This will help to increase Qualtrics’ autonomy and enable it to expand its footprint both within SAP’s customer base and beyond. Qualtrics, which is part of SAP’s cloud portfolio, has operated with greater autonomy than other companies SAP had previously acquired. The founder and current management team of Qualtrics will continue to operate the company.
SAP agreed to acquire Qualtrics just four days before Qualtrics was to go public in 2018, recognizing the potential of bringing together experience and operational data (X+O) to help organizations take action. SAP currently owns 100 percent of Qualtrics shares. SAP will retain majority ownership of Qualtrics and has no intention of spinning off or otherwise divesting its majority ownership interest. Ryan Smith intends to be Qualtrics’ largest individual shareholder. SAP is fully committed to Experience Management and the Qualtrics XM Platform as a key element of its intelligent enterprise strategy. SAP will remain Qualtrics’ closest and most important co-innovation and go-to-market partner.
SAP Recent Developments
SAP went live with 700 S/4HANA customers in 2Q20, resulting in a total of 7,400. Customer count of S/4HANA has grown to 14,600, up from 14,100 in 1Q20. 90% of SAP products will be on a common Business Technology Platform by end of 2020 as products like SAP HANA, SAP Cloud Platform, SAP Analytics Cloud deliver a fully-integrated workflow and data lake.
SAP Mergers and acquisitions (M&A) Activities
SAP is going to spin out Qualtrics, Its $8 billion acquisition from 2018, in an upcoming IPO. SAP CFO Luka Mucic estimates selling off 10% to 15% of Qualtrics in IPO over the next two months depending on market conditions. SAP is expected to complete the IPO process by December, while reaffirming its commitment to have a 90% integrated platform by year end.
SAP Customers in ARTW Customer Database
Leveraging a rigorous data-centric research methodology, APPS RUN THE WORLD asks the simple question: Who’s buying SAP applications and why? And we provide the answers – supported by decades of research – to our clients around the world. Our Customer database has over 100 data fields that detail company usage of SAP and other enterprise apps by function, customer size, industry, location, implementation status, partner involvement, Line of Business Key Stakeholders and IT decision makers contact details. List of Verified Ariba Network: Sourcing, Procurement, & Finance, Concur Expense, Concur Invoice, Concur Travel, Fieldglass: Flexible Labor Management, SAP Business ByDesign (ERP for Midsize Business), SAP Business One Cloud (ERP for Small Business), SAP BusinessObjects Cloud for Analytics, SAP Hybris Cloud for Customer, SAP Hybris Cloud for Sales, SAP Hybris Cloud for Service, SAP Hybris Commerce, SAP Hybris Marketing, SAP Qualtrics, SAP Jam Collaboration, SAP Jam Communities, SAP SuccessFactors Employee Central, SuccessFactors Performance Management, SuccessFactors Recruiting customers.
Ownership: - SAP : NYSE
Number of Employees: 99990
Functional Market: Absence and Leave Management, Workforce Analytics, Task Management, Time and Attendance, Core HR, Payroll, Pension Administration, Compliance, Contingent Labor Management, Onboarding, Recruiting, Candidate Relationship Management, Applicant Tracking Systems, Performance and Goal Management, Learning and Development, Succession and Leadership Planning, Compensation Management,
Key Verticals: Aerospace and Defense, Automotive, Banking and Financial Services, Communication, Construction, Real Estate, Consumer Packaged Goods, Distribution, K12, Higher Education, Federal Government, State and Local Government, Public Safety, Healthcare, Life Insurance, P&C Insurance, Specialty Insurance, Leisure and Recreation, Hospitality, Life Sciences, Manufacturing, Media, Faith Based Nonprofit, Youth and Elderly Care Nonprofit, Special Cause Nonprofit, Oil and Gas, Professional Services, Retail, Transportation, Utilities,
SAP Key Cloud and HCM Applications
Ariba Network: Sourcing, Procurement, & Finance, Concur Expense, Concur Invoice, Concur Travel, Fieldglass: Flexible Labor Management, SAP Business ByDesign (ERP for Midsize Business), SAP Business One Cloud (ERP for Small Business), SAP BusinessObjects Cloud for Analytics, SAP Hybris Cloud for Customer, SAP Hybris Cloud for Sales, SAP Hybris Cloud for Service, SAP Hybris Commerce, SAP Hybris Marketing, SAP Qualtrics, SAP Jam Collaboration, SAP Jam Communities, SAP SuccessFactors Employee Central, SuccessFactors Performance Management, SuccessFactors Recruiting
SAP HCM and Cloud HCM Applications Revenues, $M:
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|HCM Applications Revenues, $M||Subscribe||Subscribe||Subscribe|
|Cloud HCM Applications Revenues, $M||Subscribe||Subscribe||Subscribe|
* HCM Applications Revenues = License + Support & Maintenance + SaaS ( Hardware and Prof. Services are Excluded )
** All revenue figures are estimates based on public records, Cloud and Non-Cloud business models in Apps Run The World's vendor database, and annual survey results including vendor feedback.
SAP Revenue Breakdown by Type:
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SAP HCM Applications Revenues By Sub-Functional Markets, $M:
Split by Sub-Functional Markets
2019 HCM Revenues, By Sub-Functional Markets, $M
SAP HCM Applications Revenues By Verticals, $M:
SAP Total and HCM Applications Revenues by Region:
|Region||% of Total Revenues||2019 Total Revenues, $M||2019 HCM Applications Revenues, $M|
SAP Direct vs Indirect sales
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SAP Customers - Breakdown by Geo, Size, Vertical and Product
No. of SAP Customers: 440000
No. of SAP HCM Applications Customers: 30000
No. of SAP Cloud HCM Customers: 4000
No. of SAP Cloud HCM Subscribers: 207 million
S/4HANA, the de-facto ERP product from SAP In 2020, is enjoying steady growth. In Q2 2020, SAP reported 14,600 customers of S/4HANA, up from 11,100 in Q1 2020 and 6,900 in October 2017. The number of live customers of S/4HANA has grown to 7,400, compared with 2,000 in early 2019. The current assumption is that by 2025 SAP will be able to migrate 90% of its installed base of ERP customers, covering a total of 25,000 accounts and 48,000 systems, to S/4HANA as the core for these organizations.
In the HCM market, SAP now has signed 4,000 customers for Employee Central, compared with 2,800 in the third quarter of 2018 and 2,000 in 2017. SAP still has more than 10,000 on-premise HCM applications customers, many of whom also run SAP Payroll on a global level.Another big bloc of customers lies in SAP Concur with more than 35,000 customers for travel and expense management. In October 2019, those customers represent more than 63 million end-users processing travel and expense with SAP Concur.
SAP also reported 6.1 million individuals now are being covered by SAP Fieldglass for contingent labor management.
SAP Market Opportunities, M&A and Geo Expansions
The biggest upside potential for SAP remains its ECC customers, especially those that have been running Enhancement Pack for Enterprise Resource Planning over the past decade. These customers form the basis of its recurring revenues, mostly in the form of maintenance revenues. If SAP succeeds in migrating them to S/4HANA, their associated support revenues will grow as well because they are more likely than ever to pick up additional modules like cash management, enterprise asset management, while adopting new Cloud applications for Core HR and talent management (SAP SuccessFactors), survey (Qualtrics), travel and expense management (SAP Concur), etc.
Again, if SAP succeeds in picking up anywhere between 500 and 1,000 S/4HANA customers (now topping 10,000 already) in a quarter, the total count could top 35,000 by the end of 2025. SAP Digital Business Services now expects S/4HANA migration to take as little as 28 days. Though it seems pretty aggressive since many of these S/4HANA implementations will entail considerable amounts of testing, scripting as well as change management.
FMC Corporation, for example, is in the midst of a S/4HANA implementation that will continue through the second quarter of 2020 covering 38 countries including the agrichemical company's nerve center in Brazil. Still, with value assurance and model company methodology from SAP and its partner Accenture, FMC shows that it can be done in the Latin American country where any financial management software deployment is difficult to achieve because of stringent regulatory and compliance requirements.
Another big win could come in the analytics market where SAP Analytics Cloud has signed hundreds of partners and over 2,400 customers including dozens of marquee accounts like Cascades (a $4-billion paper manufacturer), Graphic Packaging (a $6-billion consumer packaging provider) and America Honda.
SAP Analytics Cloud (SAC) is banking on aggressive pricing, new product lineups such as SAP Data Warehouse for the Cloud as well as enhanced support for a growing portfolio of SAP applications like embedding SAC into SAP SuccessFactors to win support of the large installed base of BPC for budgeting, planning and consolidation, which stands at 7,000, and SAP BW for data warehousing, which has 11,000 customers and 21,000 installations worldwide.
SAP Risks and Challenges
The priority of SAP appears to be shifting from products to customer success and operational excellence. While the 100,000-strong SAP has no problems meeting any development challenge head-on, the move is to unwind some of its recent acquisitions in order to better focus on customer requirements, as opposed to wallet share gains.
The recent appointment of Christian Klein as sole CEO of SAP is designed to prolong and expand its domination of the ERP market, prioritizing that over multiple best-of-breed applications that are now required to better support an integrated platform. The question is whether that should have been years earlier, thus allowing its competitors to siphon its ERP franchise away.
Another risk lies in the post-pandemic era with more Cloud applications becoming widely used, perhaps rendering the intrinsic value of S/4HANA less impactful given most S/4HANA implementations are still on-premise.
SAP Ecosystem, Partners, Resellers and SI
After years of expansion, SAP’s ecosystem now covers more than 22,000 partners in 140+ countries, including 5,000+ partners for its cloud ecosystem. The majority of SAP customers are coming through partners. SAP App Center is the digital enterprise marketplace with more than 1,600 partner solutions across a variety of SAP technologies and lines of business. More than 1,650 partners are building solutions on SAP Cloud Platform today, with nearly 650 SAP Cloud Platform apps available on SAP App Center.
In the SMB space, there are more than 65,000 SAP Business One customers including 10,000+ that are already on SAP HANA. In total, there are more than one million users running SAP Business One. More than 1,000 solution partners are providing direct support and add-ons to these SAP Business One customers.
For the midmarket, there are more than 200 solution partners with 6,500+ add-ons that have been made available to strengthen SAP Business ByDesign, which is built for midsized businesses between 50-5000 employees. Their average implementation time runs between 8-12 weeks. SAP Business ByDesign offers Web client with advanced analytical capabilities, advanced extensibility and customization capabilities and it has been deployed in 146 countries and localized in 12 languages. All companies run SAP Business ByDesign on the latest SAP HANA release and SAP Fiori user interface. There are also more than 800 standard reports out of the box for SAP Business ByDesign customers.
At the Enterprise level, in 2019, SAP Digital Business Services was expected to turn over more S/4HANA implementation projects to its partners. The current plan calls for by 2025 SAP will be able to migrate 90% of its installed base of ERP customers, covering a total of 25,000 accounts and 48,000 systems, to S/4HANA as the core for these organizations. SAP DBS executives expect partners to be carrying out 80% of those S/4HANA implementations. What that entails is the upskilling of many consultants and implementers among its key partners such as Accenture, Deloitte, IBM and others.
The SAP Global Partner Organization also announced plans to certify as many as 10,000 new SAP consultants every quarter. Increasingly, SAP plans to recruit software partners especially PE-funded vendors, rather than traditional ISVs and OEM representatives. The key is to identify those that can easily extend their platforms to Cloud products from SAP while taking the engagement to the next level with revenue-sharing incentives, indirect usage rights, and integrated support all listed and promoted via SAP AppCenter and joint-sales done on SAP paper.
Another major ecosystem development lies in SAP cozying up with Microsoft with the latter reselling and placing many SAP products through its direct sales force and Microsoft Azure infrastructure. While the relationship between the two has been evolving through the years first with Duet where the two collaborated on putting SAP applications on Office and Microsoft Sharepoint over the past decade. Last year, SAP, Adobe and Microsoft announced the Open Data Initiative whereby the three agreed on a common data model for business data that span their vast product portfolios. In October 2019, the partnership grew under a new pact between SAP and Microsoft that is expected to generate €225M in new Cloud revenues over the next three years. Microsoft's sales force will start selling SAP S/4HANA and SAP's Cloud platform products, all running on Azure. The alliance between the two calls into question whether SAP will continue to rely on Google.
SAP Cloud Platform (PaaS) and Infrastructure (IaaS) Details
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Data used in research reports are derived from publicly available documents, continuous surveys of applications vendors, customers, resellers, Independent Software Vendors, systems integrators and other verifiable sources.
Vendor shares and market forecast results are based on a combination of existing databases as well as demand side and supply side research conducted throughout the year with validation from vendors, customers, channel partners and documentations such as earnings releases and 10Q and 10K filings, vertical industry studies, regional and country-level statistics from public and private institutions(i.e. colleges, universities, government agencies and trade associations).
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