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SAP Company Viability Review

SAP's large size, global market share, 40+ year industry tenure, and base of well over 100,000 customers suggest an overall health and viability that appears relatively strong. The company's executive team includes industry's archetypes for leadership and SAP counts an impressive mix of talent, drive, and vision that faces few comparable rivals. This isn't to suggest that the company hasn't experienced its share of hardship though. The most recent recession and market downturn stalled the company's growth (resulting in negative growth), lowered margins, wound up costing thousands of jobs and severely hampered the company's ability to deliver any market leading innovation. Further, a series of miscalculations have cost the company dearly in terms of customer churn and goodwill—fueled in large part by executive turnover, maintenance fee escalations (which the company ultimately retracted, or at least delayed), a bundled SaaS ERP initiative (Business ByDesign/Career OnDemand), and a growing discontent with customers over the Total Cost of Ownership (TCO) for on-premise software. Despite these setbacks, SAP continues to be one of the most financially viable enterprise software publishers in the ERP or HR software industry.

SAP's HR software success of late could be attributable to myriad factors, two of the most salient being the $3.4B acquisition of SaaS HR and talent management software company SuccessFactors along with a sizeable increase in demand for the company's HANA in-memory computing technology. As it pertains to SuccessFactors (SFSF), spokespeople for SAP have indicated that the SuccessFactors HR software offering could ultimately become the replacement system for the on-premise ERP HCM—an obvious sign that (while late to the game) SAP is desirous to build out an impressive (and cloud-based) end-to-end HRMS and talent management solution.

SAP's HANA (which uses in-memory analytics to allow for near real-time and simultaneous analysis and database recording), is perhaps the most significant potential success for the company. In large, part this success by SAP hinges on the idea that the around 15,000 businesses using SAP's Business Warehouse will replace their largely Oracle databases in favor of SAP's HANA. Further, as reported by Information Week, 60% of SAP's current customer-base are using SAP enterprise applications with an Oracle database; a potentially big market as of yet.

While SAP will continue its HR and HCM strategy with SuccessFactors and HANA's in-memory functionality, other announcements shed light on future directions; including the acquisitions of Ariba, Crossgate AG (a premier B2B networking provider) and a $2B billion plan for development in China—designed to move the company from the number 2 spot in the Chinese market to the number 1. Each of these moves signal that SAP continues to aggressively pursue its growth strategy and market share leader position.

Next: SAP HR Strengths and Weaknesses >>

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