2. INTRODUCTIONINTRODUCTION…
Kagermann, CEO of SAP AG, believed that emerging
Internet-based Technologies and standards known
collectively as “Web services” soon would transform the
$79.8 billion enterprise software applications industry.
The implementation of SAP’s recently defined Web
services strategy was based on framework SAP called
the Enterprise Services Architecture (ESA).
As he flipped through the report, Kagermann reflected
upon the sweeping internal transformation that SAP still
needed to complete his stated goals.

3. INTRODUCTIONINTRODUCTION…
In addition to requiring a costly research and
development effort, capitalizing on SAP’s new growth
initiatives required far-reaching change that would test the
very core of the company: its leadership, its culture, its
values, its processes.
On the one hand, Kagermann felt confident that SAP
eventually would make the adjustments necessary to
prolong its financial success in a future dominated by
Web services. On the other hand, competitors including
Oracle, Microsoft, and IBM were investing billion of
dollars into similar growth initiatives.
Kagermann recognized that time to market was critical.

4. INTRODUCTIONINTRODUCTION…
As Kagermann deliberated his options, three questions
recurred in his mind.
1
2
3
How could he determine whether the current pace of
execution regarding the new growth strategy was right?
How should he sequence the rollout of changes still required?
How should he balance resource
allocation between short and long-term opportunities?

5. INTRODUCTIONINDUSTRY AND COMPANY OVERVIEW…
Enterprise software applications helped companies
achieve cost efficiencies, make better decisions, and increase
customer value. Enterprise applications constituted an
approximately $80 billion worldwide market in 2005, with
compound annual growth in the range of 7.5 percent projected
through 2010.
In 2005 In 2006
SAP’s share of the
worldwide enterprise
applications market by total
revenue was approximately 9
percent, the largest of any
industry player.
SAP reported that its license
revenues for business applications
over the most recent four quarters
were more than three times those of
its closest competitor, Oracle.
However, Oracle recently had made
aggressive moves to consolidate the
industry.

6. INTRODUCTIONINDUSTRY AND COMPANY OVERVIEW…
The dynamics of the enterprise software industry
were marked by “competition”. The fact that SAP and
Oracle were fierce competitors in the enterprise
applications space, over 60 percent of SAP customers
used Oracle databases to store the data used by their
SAP applications.
Furthermore, SAP and Oracle salespeople had
been known to collaborate on joint sales opportunities.

7. INTRODUCTIONSAP’S NEW GROWTH STRATEGY…
After deliberating with his leadership team, Kagermann decided to
focus on three primary growth initiatives. First, SAP would develop an
innovative Web services-based “platform”—a collection of software
technologies, tools, and content. Kagermann referred to his platform as the
business process platform, or BPP for short, and it represented the tangible
product of SAP’s Enterprise Services Architecture vision. Second, SAP
would intensify its focus on the SME market segment by developing more
streamlined and flexible applications and expanding midmarket sales
channels. Lastly, SAP would broaden the relevance of its products by
offering functionality that appealed to more corporate users and by
improving user interfaces.
Kagermann’s corporate analysts were correct, growth strategy
would result in the return of sustained double-digit sales growth and net
margins of more than 30 percent until 2010 or 2011 before the BPP and
other products of the new growth strategy achieved board adoption across
the SAP customer base.

8. INTRODUCTIONGrowth Initiative One
Kagermann positioned the BPP as an extension of an
existing set of integration technologies collectively called SAP
Net Weaver. The main purpose of Net Weaver was to help SAP
customers integrate disparate SAP and non-SAP applications
so that they interoperated seamlessly.
The vision of the Enterprise Services Architecture was
to make it radically easier and cheaper for customers and
partners to do three things:

9. INTRODUCTIONGrowth Initiative One
1
Create software
applications that
did exactly what
customer wanted
2
Extend or
change
applications
when desired
3
Integrate SAP
and non-SP
applications
and services

10. INTRODUCTIONGrowth Initiative One
The Enterprise Services Architecture vision built upon
NetWeaver technology into main areas. First, it added an
“application platform” that contained a repository of hundreds
of individual business processes. Second, it added a
“composition platform” consisting of tools that enabled
customers to combine individual enterprise services they
wanted to use into full-featured enterprise applications.
Open and clearly defined interfaces would make it
easy for customers or partners to extend the pre-build
enterprise services included in the BPP, and SAP intended to
add new services to the repository on a frequent basis.

11. INTRODUCTIONGrowth Initiative One
Service oriented architecture represented a new software
design paradigm that leveraged the Internet to tie together
disparate, loosely coupled, yet highly interoperable software
functions known as Web services.
To launch and support the BPP, SAP engineers needed to
undertake a significant and ongoing research and development
effort. Most of the enterprise services that would become part of
the BPP already existed in one or more SAP applications, so each
of these business processes needed to be decoupled from its
“mother” application and reconciled with other similar processes
that existed in other SAP applications. Furthermore, to ensure
compatibility with already installed SAP applications. The entire
mySAP Business Suite had to be enhanced in order to become
interoperable with the service composition protocols and
standards established by the BPP.

12. INTRODUCTIONGrowth Initiative Two
SAP’s traditional focus on large enterprises also led it to
define the SME segment more broadly than many analysts and
competitors did. SAP included companies up to $1.5 billion in
revenue in this customer segment. This approach caused some
outsiders to question SAP’s true performance in meeting the
unique needs of smaller firms. Microsoft considers any company
with more than 500 PCs or 1,000 employees to be an Enterprise
company, not an SME. It would hardly categorize a billion dollar
company as ‘small’ or ‘midsize’.
In addition, SAP’s direct sales force still served as the
primary channel for acquiring midmarket customers. To increase
the volume of SME sales, SP needed to move further down-
market, where channels, customers, and competitors were quite
different.

13. INTRODUCTIONGrowth Initiative Three
SAP’s existing applications, catered to small number of
highly trained users within an organization. Initially the cost and
complexity of enterprise computing restricted the broad use of
business applications.
Compared to the average Web site, the typical SAP
application required employees to receive significant training in
order to understand how to use it. Despite SAP’s large number of
customers, the company had significant opportunities to deliver
greater value by developing more broadly appealing software
and/or packaging existing functionality and information in ways
more accessible to end users.

14. INTRODUCTIONGrowth Initiative Three
SAP and Microsoft had formed a
broad collaboration in this area called
Project Mendocino, and set out
developing a product to be launched
under the brand name Duet. Joint
products that embedded functionality
and data from a customer’s SAP
applications into Microsoft’s Office
suite of desktop applications.
In 2004

15. INTRODUCTIONCORPORATE TRANSFORMATION…
The new growth strategy developing new products was
only part of the requirement for success. To kick start the
change process, Kagermann made several public
announcements and implemented a broad organizational
restructuring.
In January 2005, Kagermann began to unveil SAP’s
new growth initiatives to analysts. Over the ensuing months,
he elaborated a roadmap that included completion of the BPP
and related initiatives by the end of 2007, and set various
financial goals for SAP to achieve by 2010.
As Apotheker began to address the new growth
initiatives within the SAP field organizations, Plattner looked
to Agassi to drive the expanded platform vision from a
development perspective.

16. INTRODUCTIONThe GOAL Reorganization…
In 2003
Kagermann and Plattner had
implemented a major
organizational redesign called
SCORE, short for Strategic
Cross-Organization Realignment.
SCORE attempted to increase the
efficiency of the SAP
organization by grouping SAP’s
17 industry and product units into
three Business Solution Groups
(BSGs) and by introducing more
structure into the product
development process.
Kagermann announced GOAL,
short for Global Organizational
Alignment. Starting at the Executive
Board level, GOAL reorganized SAP
along five segments of the value chain:
Research and Breakthrough
Innovation, Products and Technology,
Production, Global Service and
Support, and Customer Solutions and
Operations. GOAL also established
two support functions that cut across
the five value chain focused groups:
Finance and Administration, and
Human Resources and Processes.
In 2005

17. INTRODUCTIONIDENTIFYING TRANSFORMATION
CHALLENGES IN 2005
...
Kagermann knew that executing on the new
growth strategy posed several challenges that he could
not solve with organizational restructuring alone.
The new growth strategy involved uncertainty,
change, and the sacrifice of clear short-term
opportunities. Kagermann needed strong commitment
from all of his employees in order for SAP to have any
chance at achieving its goals. To build understanding and
maintain engagement, he committed himself to
discussing the new growth initiatives with employees as
much as possible, and focused resource on the Cascade
initiative.

18. INTRODUCTIONDevelopment of New Sales and Support Models
SAP had built its fortune by selling complex
software system to the world’s largest organizations. This
business was rife with complexities: developing highly
advanced and reliable software, closing multimillion-dollar
deals, maintaining 24/7 support for thousands of software
installations across the globe.
Being both an application platform provider and an
applications provider multiplied possibilities for channel
conflict, which SAP largely had avoided in the past. The
question remained whether SAP could set up the right
models and processes to manage the anticipated tensions
between its own salesperson, ISV partners, and other
channel sales partners.

19. INTRODUCTIONDevelopment of New Sales and Support Models
Regarding customer support, in order to reach the
goal of having 100,000 customers in 2010, we will need to
add almost 20,000 net new customers a year for the next
four years. It will be impossible to send people on site to
do quality assurance for all of these projects. We have to
think about some new ideas: remote servicing, automatic
error data evaluation, automatic updating, and so on.
Involved building more support functionality into the BPP,
which deepened the dependency of support staff on SAP’s
product development team.
SAP also needed to expand and improve program to
educate and support small ISV partners in an efficient
fashion.

20. INTRODUCTIONIncreased Scope and Importance
of the Partner Ecosystem
SAP need to transform both our selves and the SAP
brand from a high-end application vendor into a world-
class provider of applications and infrastructure –
‘applistructure’ as many analysts call it. So we need to put
into place all of the foundations for a partner ecosystem,
and build channels for the midmarket and for the small end
of the market.
Apotheker and his team also had to figure out
successful revenue sharing models and joint sales
processes that would provide incentives and structure for
partners who wished to engage customers jointly with
SAP’s sales force or on SAP’s behalf.

21. INTRODUCTIONIncreased Need for Development Alignment,
Efficiency, and Agility
The move to the BPP meant that existing SAP
applications and any solutions SAP build in the future had
to share architectural standards and common software
components.
Most SAP senior executives felt that in order to
deliver upon the PP strategy, the development organization
needed to be more controlled, predictable, and market-
driven. Furthermore, roles needed to be more clearly
defined and segmented.

22. INTRODUCTIONDevelopment of New Skills and Competencies…
Success with the new growth strategy
required skills and capabilities that SAP
traditionally did not deem critical. In the past,
technical aptitude and strong customer
relationships were top priority.
With the BPP, the entire spectrum of hoe
SAP developed, sold, and supported software
needed to change, especially given the important
role SAP wanted external partners to play.

23. INTRODUCTIONDevelopment of New Skills and Competencies…
Executives across nearly all functional groups pointed to
skill development needs. In the future, we will have to analyze a
web of interconnected systems owned by a customer,
complemented by Web services from different providers, and get
an impression of how these systems and services support the
customer’s business processes. That requires another level of
thinking, analysis, and perception.
On the sales front, “We are no longer selling technology”,
“We are selling business opportunity, and we have to prove the
benefits. At the same time, we’re changing the business model
for consulting from selling people to selling intellectual capital.
To do all of this successfully, we need to change the genetic
makeup of our people.

24. INTRODUCTIONDevelopment of New Skills and Competencies...
Success with the new growth
strategy required skills and
capabilities that SAP
traditionally did not deem critical. In the past,
technical aptitude and strong customer
relationships were top priority.
With the BPP, the entire spectrum of hoe
SAP developed, sold, and supported software
needed to change, especially given the important
role SAP wanted external partners to play.

25. INTRODUCTIONDevelopment of New Skills and Competencies...
Executives across nearly all functional groups pointed to
skill development needs. In the future, we will have to analyze a
web of interconnected systems owned by a customer,
complemented by Web services from different providers, and get
an impression of how these systems and services support the
customer’s business processes. That requires another level of
thinking, analysis, and perception.
On the sales front, “We are no longer selling technology”,
“We are selling business opportunity, and we have to prove the
benefits. At the same time, we’re changing the business model for
consulting from selling people to selling intellectual capital. To do
all of this successfully, we need to change the genetic makeup of
our people.

26. INTRODUCTIONProgress on Growing Market Share in the Midmarket...
We’re hiring a ton of reps to focus on the
midmarket. Efforts to build the indirect sales channel and
proactively manage anticipated channel conflict were
still in progress. 2006 is a critical year for us to invest in
multi-channel sales models, but by the end of 2006 we
will have put the foundation in place to have SAP
prospering.
On the support side, the responsible parties were
still discussing many key issues. For 2007 to 2010, the
task is now to develop the service and support portfolios
that enable us to reach these figures.

27. INTRODUCTIONRemaining Challenges...
Driving successful economics of our
ecosystem based on an open platform and co-
innovation is critical for SAP’s future growth.
Shifting to more partner-focused thought processes
across the organization was still a work in process.
To accelerate this process, Snabe had changed the
objectives of his direct reports so that they were
measured not only on SAP application revenue, but
on the total revenue of the SAP ecosystem, partners
included.

28. INTRODUCTIONRemaining Challenges...
To help cascade understanding of the new growth
initiatives, Kagermann had leaned heavily on his corporate
communications team and the Corporate Strategy Management
group. To evaluate progress toward achieving SAP’s corporate
goals, Kagermann and his team also had identified 34 Strategic
Performance Management Objectives as part of the Best-Run SAP
effort.
By the beginning of 2006, Kagermann was confident that
his senior executives shared a clear understanding of SAP’s
strategy and what would be required to execute it.
At lower levels of the organization, achieving
understanding and alignment required more work. In some
functional areas, translating the vision into concrete tasks that
people can do to help this company deliver is extremely difficult.

29. INTRODUCTIONRemaining Challenges...
In addition, employees were still adjusting to the
changes made during the GOAL reorganization and to the
recent institution of more centralized development
processes. In the past, people owned responsibility over
areas for a given product. Now the role is different. We are
all part of one big platform, and we each need to contribute
a little piece to it.
Most executives, though, shared confidence that
given time, SAP would adjust to the various changes
underway and succeed with the new growth initiatives.
People just don’t change that quickly. We all need time to
digest this stuff.

30. INTRODUCTIONCOMPETITIVE CHALLENGES AHEAD...
While Kagermann was driving forward SAP’s growth
strategy, the company’s rivals were not standing idle. For example,
although the company had announced no official plans to build
business applications targeted at very large enterprises, Microsoft
Chairman Bill Gates had dropped some hints.
Our products can scale up to cover a super, super high
percentage of all businesses in the world. Moreover, Oracle also
had formed several new midmarket channel partnerships and
publicized, with much fanfare, an offer to debate up to 100 percent
of its license fees to existing SAP R/3 customers that switched to
Oracle applications. As he assessed the competitive environment,
Kagermann saw time as SAP’s primary advantage:
Our competitors are big, powerful companies. I would never
doubt that they have the capabilities to do what we are trying to
do.

31. INTRODUCTIONCOMPETITIVE CHALLENGES AHEAD...
But they need more time than we do. Microsoft has
to learn how to understand large enterprise. Oracle has to
figure out how to bring together all these companies they
have brought, which takes years.
Recent reports in the press and form Apotheker’s
sales team confirmed the fact that enterprise adoption of
Service Oriented Architectures varied widely from company
to company, and not all analysts and customers felt that the
new growth initiatives were the best move for SAP.
Merritt, for one, underscored the need for urgency
in completing the BPP related initiatives as soon as possible

32. INTRODUCTIONConclusion..
Kagermann closed the cover of the Sun-Tzu document.
We have a unique window of opportunity. Last year, it was
important for us to clarify the strategy and reshape the
organization. Now the strategy is set and executed, we will
make small changes and technical adjustments. If we
executed effectively, we can change the culture with success.
Kagermann was proud of the progress SAP had made
over the past year, yet he knew tensions and challenges
remained. Besides the persisting internal execution issues,
external threats were intensifying. Peering into the chill
night, he had plenty of time to plan his next moves on the
drive back to Heidelberg.

33. INTRODUCTIONSAP History..
From Start-Up Software Vendor to Global
Market Leader
Over the course of three decades, SAP has
evolved from a small, regional enterprise into a world-
class international company. Today, SAP is the global
market leader in collaborative, inter-enterprise
business solutions. The company now employs more
than 47 804 people, whose commitment and innovative
spirit pace our future success.

34. INTRODUCTIONSAP History..
A Real-Time Vision
In 1972, five former IBM employees – Dietmar Hopp,
Hans-Werner Hector, Hasso Plattner, Klaus Tschira, and Claus
Wellenreuther – launch a company called Systems Applications and
Products in Data Processing in Mannheim, Germany. Their vision:
to develop standard application software for real-time business
processing.
One year later, the first financial accounting software is
complete, forming the basis for the continuous development of other
software components in what later came to be known as the "R/1
system." "R" stands for real-time data processing.
By the end of the decade, intensive examination of SAP's IBM
database and dialog control system leads to the birth of SAP R/2.
In 1970s

35. INTRODUCTIONSAP History..
Rapid Growth
SAP moves into the company's first building on Max-Planck-
Strasse in an industrial park in Walldorf, near Heidelberg. Our software
development area and its 50 terminals are all now under one roof. Fifty of
the 100 largest German industrial firms are already SAP customers.
The SAP R/2 system attains the high level of stability of the
previous generation of programs. Keeping in mind its multinational
customers, SAP designs SAP R/2 to handle different languages and
currencies. With this and other innovations in SAP R/2, SAP sees rapid
growth.
By the middle of the decade, SAP founds its first sales
organization outside Germany, in Austria. The company makes its first
appearance at the CeBIT computer fair in Hanover, Germany. Revenues
reach DM 100 million (around $52 million), earlier than expected.
In 1980s

36. INTRODUCTIONSAP History..
Rapid Growth
In August 1988, SAP GmbH becomes SAP AG. Starting
on November 4, 1.2 million shares are listed on the Frankfurt and
Stuttgart stock exchanges.
Germany's renowned business journal, manager
magazine, names SAP its Company of the Year – a distinction we
would receive twice more in the next few years.
With the founding of subsidiaries in Denmark, Sweden, Italy, and
the United States, SAP's international expansion takes a leap
forward.
In 1980s

37. INTRODUCTIONSAP History..
A New Approach to Software and Solutions
SAP R/3 is unleashed on the market. The client-server concept,
uniform appearance of graphical interfaces, consistent use of relational
databases, and the ability to run on computers from different vendors meets
with overwhelming approval. With SAP R/3, SAP ushers in a new
generation of enterprise software – from mainframe computing to the three-
tier architecture of database, application, and user interface. To this day, the
client-server architecture is the standard in business software.
A growing number of subsidiaries are managed out of Walldorf.
The new Sales and Development Center in Walldorf officially opens it
doors. It symbolizes the global success of the company. In our twentieth
year, our business outside Germany exceeds 50 percent of total sales for the
first time.
By 1996, the company has earned 1,089 new SAP R/3
customers. At the end of the year, SAP R/3 has been installed in more than
9,000 systems worldwide.
In 1990s

38. INTRODUCTIONSAP History..
SAP celebrates its twenty-fifth anniversary in 1997 and now
employs approximately 12,900 people. We continue to strengthen
our industry focus and build more and more industry-specific
solutions. Henning Kagermann becomes Co-Chairman and CEO of
SAP AG with Hasso Plattner. On August 3, 1998, the letters S-A-P
appear for the first time on the Big Board at the New York Stock
Exchange (NYSE), the largest stock exchange in the world.
As the decade draws to a close, Hasso Plattner, Co-Founder,
Co-Chairman, and CEO announces the mySAP.com strategy,
heralding the beginning of a new direction for the company and our
product portfolio. mySAP.com links e-commerce solutions to
existing ERP applications, using state-of-the-art Web technology.
In 1990s

39. INTRODUCTIONSAP History..
Innovation for the New Millennium
With the Internet, the user becomes the focus of
software applications. SAP develops SAP Workplace and
paves the way for the idea of an enterprise portal and role-
specific access to information.
Currently, more than 12 million users work each day
with SAP solutions. There are now 140,000 installations
worldwide, More than 2,400 certified partners, over 26
industry-specific business solutions, and more than 75,000
customers in 120 countries. SAP is the world's third-largest
independent software vendor.
In 2000s

40. INTRODUCTIONSAP History..
With service-oriented architecture and the
underlying integration and application platform SAP
NetWeaver, SAP is providing our customers with solutions for
end-to-end business processes. With SAP NetWeaver, your
company can integrate people, information, and processes
within the company and beyond.
To further demonstrate our commitment for
ongoing innovation, growth, and market leadership, SAP
acquired Business Objects in 2008. Together, SAP and
Business Objects, an SAP company, offers the industry's most
comprehensive portfolio of business performance and
optimization solutions for companies of all sizes.
In 2000s

41. INTRODUCTIONSAP Solutions..
Making your business A Best – run business
Enterprise Software
∟ SAP Business Suite
∟ SAP Customer Relationship
Management
∟ SAP ERP
∟ SAP Product Lifecycle
Management
∟ SAP Supply Chain
Management
∟ SAP Supllier Relationship
Management
∟ SAP Solutions for
substainability
∟SAP Business Objects
Intelligence Platform
∟SAP Business Objects GPC
Solutions
∟SAP Business Objects EPM
Solutoins
∟SAP Solutions for auto-ID &
Item Serialization
∟SAP Manufactoring
∟ALLOY

42. INTRODUCTIONSAP Solutions..
Making your business A Best – run business
Solutions for Small Businesses
and Midsize Companies
∟ SAP Solutions for Small
Businesses and Midsize
Companies
∟ SAP Business All-in-One
∟ SAP Business ByDesign
∟ SAP Business One
∟SAP Business
Objective Portforlio
∟SAP Business Objects
Edge
∟Cystal Reports
∟Xcelsius
∟Free Trials

43. INTRODUCTION
THE END

44. INTRODUCTION
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