SAP_2015-01-30

SAP

ANALYSIS for NYSE : SAP JANUARY 30, 2015

$77.98$93.2 B MKT CAP

Trefis Estimate

$65.82$78.7 B MKT CAP

Market Price

See the Full Analysis for SAP on Trefis

CORPORATE SNAPSHOT

SAP makes money by selling crucial software applications to businesses

worldwide. Companies use SAP software to efficiently integrate and process

data, better manage customer and supplier relationships, and shorten product

lead time to market through use of product management software.

Each of these four steps, i.e. integrate and process data, manage

customer relationships, manage supplier relationships, and shorten product

lead time, can be thought of as corresponding to one of SAP's four main

software offerings.

Enterprise Resource Planning Software (ERP):SAP's best known product is its SAP Enterprise Resource Planning (SAP

ERP) software. Enterprise Resource Planning (ERP) is software used for

integrating the data and processes of an organization into one single system.

For example, in a bank, a credit card system and a savings account

system are two different systems having no common interface. SAP ERP

provides an interface which connects all systems together, in this example

connecting credit card and savings account systems.

With the bank's system integrated using ERP software, the bank's

customers will now be able to auto-debit their credit card payments to their

savings account. Without this vital integration of the two systems, the

customer would have to manually transfer funds from his savings account to

his credit card account. Furthermore, by tracking such information, ERP

software helps the bank cross sell credit cards to their savings account

customers and vice-versa leading to new revenue opportunities.

Customer Relationship Management Software (CRM):Customer Relationship Management (CRM) is software that allows

companies to better manage customer information such as leads, transaction

history and communication history. CRM data helps companies acquire and

retain customers as well as gain marketing and customer insight.

For example, a customer may always buy the same product from a

retailer. The retailer could advertise similar products to the customer if it kept

track of the specific products purchased by the customer as well as the

customer's spending habits and what products he may be interested in the

future. Tracking and organizing such information creates significant business

opportunities for the retailer. It is challenging to do such customer specific

RESOURCE PLANNINGSOFTWARE

5

SAP Market Share in Resource

Planning Software

6

Resource Planning Software

Market

7

Resource Planning Software Gross

Profit Margin

SUPPLY CHAIN SOFTWARE

8

SAP Market Share in Supply Chain

Software

9

Supply Chain Management Software

Market

10

Supply Chain Software Gross Profit

Margin

BUSINESS INTELLIGENCESOFTWARE

12

SAP Business Intelligence Software

Market Share

13

Global Business Intelligence Software

Market

14

Business Intelligence Software Gross

Profit Margin

CUSTOMER RELATIONSHIPSOFTWARE

15

SAP Market Share in Customer

Relationship Software

16

Customer Relationship Software

Market

17

Customer Relationship Software Gross

Profit Margin

OTHER SOFTWARE

19

Product Lifecycle & Other Software

Revenue

20

Other Non-financial Liabilities (Non-

current) as % of Revenue

20

Produce Lifecycle & Other Gross Profit

Margin

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marketing without the help of the CRM software.

Supply Chain Management Software (SCM):Supply Chain Management (SCM) is software that helps companies track

the movement and storage of raw materials, work-in-process inventory, and

finished goods from point of origin to point of consumption.

For example, a medical services company that sells medical and surgical

supplies to hospitals would benefit from a supply chain management system

that can coordinate with medical supply manufacturers and hospital

customers. By keeping track of usage patterns, the supply chain management

system will be able to forecast the demand of medical and surgical products

by seasons, by regions and by customer types. This will help both the medical

service company and hospitals to more efficiently manage their supply

inventory levels.

Large retailers with many regional distribution centers like Wal-Mart

use supply chain management systems to coordinate between suppliers of

merchandise (e.g. clothes, paper products) and Wal-Mart's retail stores to

reduce the inventory cost. This helps retailers like Wal-Mart pass savings

onto customers in the form of lower prices for many everyday products. The

backbone of many service operations is Supply Chain Management or SCM.

VALUATION HIGHLIGHTS

Resource Planning Software constitutes 35% of the Trefis price estimate

for SAP's stock.

1.

Supply Chain Software constitutes 19% of the Trefis price estimate for

SAP's stock.

2.

Business Intelligence Software constitutes 17% of the Trefis price

estimate for SAP's stock.

3.

See the Interactive Valuation Breakdown on Trefis

Our share price estimate and the overall company value is derived by

summing-up the values of individual divisions/businesses in a sum-of-the-

parts analysis. The value of each division is calculated using a discounted cash

flow (DCF) methodology.

We forecast fundamental drivers like pricing, market share, and profit

margins for different businesses in estimating the divisions value within the

DCF framework. The analysis below primarily focuses on those important

PROFESSIONAL SERVICES 22Consulting Revenue

23Training & Other Revenue

23

Professional Services Gross Profit

Margin

APPENDICES 27Summary P&L for SAP

28

Detailed Resource Planning Software

P&L

29

Detailed Supply Chain Software

P&L

31

Detailed Business Intelligence Software

P&L

32

Detailed Customer Relationship

Software P&L

33Detailed Other Software P&L

34

Detailed Professional Services

P&L

TREFIS ANALYSIS for SAP [email protected] + 1 617 394 8763 2

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forecasts that drive our share price and value estimate.

Our complete analysis, including sources of historical data, underlying

equations and additional discussion are available on www.trefis.com.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of SAP's value that present opportunities for upside or

downside to the current Trefis price estimate for SAP:

Enterprise Software

SAP ERP Market Share: We estimate that SAP share in Enterprise

Resource Planning (ERP) software market has declined from around

26.8% in 2008 to around 24% in 2014. We expect it to remain almost

stable over our forecast period, as the increased integration of HANA

may be offset by heavy competition in the cloud segment. If SAP

manages to capture 35% of the market by the end of the forecast period,

there could be a 16% upside to its price estimate.

SAP CRM Market Share: We estimate that SAP share in Customer

Relationship Management (CRM) software has declined from around

22.5% in 2008 to 12% in 2014. We expect that SAP will benefit from the

excellent off-take of HANA and integration of the platform and SAP's

applications.

However, SAP faces stiff competition from Salesforce.com, Oracle and

Microsoft in this market. Pure cloud computing players like

Salesforce.com have an advantage over SAP as it can benefit from the

expected fast growth of cloud computing market. Also, Oracle has

claimed that it is gaining applications market share from SAP. We

believe that the benefits from SAP Hana will be offset by market share

gains by its competitors. Consequently, we expect SAP's market share to

decline to 8.7% by the end of Trefis forecast period.

For additional details, select a driver above or select a division from the

interactive Trefis split for SAP at the top of the page.

SOURCES OF VALUE

The ERP software segment is SAP's most valuable segment for the following

reasons:

High Market Share in Large ERP MarketSAP remains the leader in the ERP market with a market share of around

24% in 2014. We believe that SAP's ERP market share will decline marginally

by the end of the Trefis forecast period due to heavy competition and low

barriers to entry in the cloud segment.

On the flipside, we believe SAP may lose market share in future due to

Better innovative efforts taken by its competitors.

Increasing presence of its competitors across the globe.


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High Gross Profit MarginSAP benefits from high gross profit margins on all its software products to

the tune of 81%.

KEY TRENDS

Battle of faster technology continuesTime and again SAP has announced that its in-memory is a disruptive

technology, which speeds up data storage and retrieval to unprecedented

speeds. Leveraging the in-memory technology is a software known as HANA

(High Performance Analytic Appliance) that SAP released a few months

back. HANA uses a different method of storing and retrieving data by

storing it on computers CPU rather than traditional way of reading and

writing on storage disks.

On the other hand, Oracle has also made great strides over the last year

or so through the introduction of faster Exadata machines capable of

producing millions of transactions quickly.

Software as a Service (SaaS)Software as a Service (SaaS) is a subscription based service where companies

can access software online and pay only for the functionality utilized. This is

oftentimes a cost effective solution for companies, and suits small and

medium enterprises more, as they have low IT budgets. In this model the

software is generally hosted on the service provider's servers from where it can

be easily accessed by users. As such, businesses can save heavily on costs and

time involved with purchase and implementation of expensive software. We

forecast an increasing trend towards "Software as a Service" adoption.

SAP SaaS offering includes CRM, which it sells by the name CRM on-

demand.

See the Full Analysis for SAP on Trefis


http://www.trefis.com/company?hm=SAP.trefis&from=pdf:3

1.

Resource Planning Software The Resource Planning Software division constitutes 34.9% of our $77.98 price estimate for this stock, based on our sum of

the parts analysis.The most important drivers for the Resource Planning Software business are:

SAP Market Share in Resource Planning Software

Resource Planning Software Market

Resource Planning Software Gross Profit Margin

SAP MARKET SHARE IN RESOURCE PLANNING SOFTWARE

SAP Market Share in Resource Planning Software represents the percentage of the global Enterprise Resource Planning

(ERP) market (in terms of new software license sales) attributable to sales by SAP.

ERP software is used for integrating the data and processes of an organization into one single system.

SAP's primary competitors within ERP include Oracle, Infor, Sage and Microsoft.

With around 24% market share, SAP is a clear market leader in the ERP space. However, the company has recently

experienced declines in its ERP Market share. SAP's market share has decreased from around 27% in 2008 to 24% in 2014.

Trefis forecasts that SAP Market Share in Resource Planning Software will remain around the 24% level because

increasing integration of ERP software with HANA will be offset by higher competition in the cloud industry.

Forecast Rationale

THREAT FROM SMALLER PLAYERS Infor and Sage are two small players in the ERP market, but they have shown

tremendous growth of late . Infor has taken several innovative steps to increase its share, one such example being its

recent announcement of OpenSOA. It is a mechanism by which it becomes easy for customers to self-configure and

integrate different systems without the vendors intervention. This reduces cost and instantly and seamlessly adds

tremendous value to the business. Sage's strongest areas of specialization are in healthcare, payment processing and

online banking--a sector that has seen increasing need for such solutions.

SAP Market Share in Resource Planning Software (%)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

5

1 0

1 5

2 0

2 5


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1.

2.

ORACLE'S INCREASING PRESENCE IN THE FINANCIAL SERVICES AND PUBLIC SECTOR Oracle's acquisition of

PeopleSoft in 2005 catapulted Oracle to the second spot behind SAP. Oracle has increased its presence in Europe,

with increasing support for the financial services and public sector. It has also taken a greater interest in Human

Resources Management Software.

Sources for historical data and explanations can be found on the Trefis.com website (link)

RESOURCE PLANNING SOFTWARE MARKET

Resource Planning Software Market represents the global Enterprise Resource Planning (ERP) market in terms of new

software license sales.

ERP software is used for integrating the data and processes of an organization into one single system.

Resource Planning Software Market has increased from $21.4 billion in 2008 to $27 billion by 2013. Trefis forecasts that

Resource Planning Software Market will continue to increase at a moderate rate and reach $44 billion by 2021.

Forecast Rationale

ON-GOING NEED FOR BUSINESS PROCESSES AND SYSTEMS DATA INTEGRATION DRIVING THE ERP MARKET There is an

ever increasing need for companies to automate and integrate various business processes and system data. This need is

derived in turn from the need to cut costs and increase efficiency and customer satisfaction. Large companies have

adopted ERP to a large extent, but the Small and Medium Businesses are yet to adopt it and benefit from it. Hence

SMBs segment remain largely unpenetrated and are potential customers for ERP vendors.

SECTORS LIKE FINANCIAL SERVICES AND HEALTHCARE TO BE THE DRIVING INDUSTRIES FOR ERP Large financial

organizations like JP Morgan and Bank of America rely on ERP software to track customer information in order to

more effectively sell new financial products. For example, Bank of America can use information about a customer's

credit card history as well as information about their financial status gleaned from savings and checking accounts to

offer the customer new financial products that they are likely to find attractive. Demand for SAP's ERP software

within the healthcare segment is increasing due to the volume of patient data being generated from the on-going

digital transformation of health records. SAP's ERP software will help hospitals, clinics and private practices to

Resource Planning Software Market ($ Bil)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

1 0

2 0

3 0

4 0


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3.

4.

1.

better manage their patient records and therefore reduce costs associated with storing, tracking and duplicating paper

records.

ERP SOFTWARE AS A SERVICE COULD SHOW TREMENDOUS GROWTH Software as a Service is a subscription-based

service where companies can access a software online and pay only for the functionality required. This is clearly a cost

effective solution for companies, and suits small and medium enterprises more as they have low IT budgets.

EMERGENCE OF OPEN SOURCE ERP implementations are quite complex in nature and generally require a lot of

customization at the client site, as the standard ERP package does not suffice all the needs of the client. With the

emergence of open source, clients IT team can own and customize the software's source code as per their

requirements. It provides them with a great deal of flexibility at a lower initial cost. The only drawback of this is that

the software maintenance and upgrade patches that ERP vendors provide may not work perfectly with the

customized code and could create costly complexities.


RESOURCE PLANNING SOFTWARE GROSS PROFIT MARGIN

Gross Margin represents Gross Profit as a percentage of Revenue. Gross Profit is determined as Revenue minus Cost of

Goods and Services Sold.

The Resource Planning Software Gross Profit Margin increased from 79.4% in 2008 to 81.4% in 2013, but declined to

80.5% in 2014 due to strengthening of the dollar against the Euro.

Trefis forecasts that Resource Planning Software Gross Profit Margin will remain nearly stable over the forecast

period.

Forecast Rationale

INCREASING MIX OF MAINTENANCE REVENUES WILL PUSH MARGINS UP Software Maintenance and Support is a high

margin business, with a margin in excess of 90%. We believe the revenues from Software Maintenance and Support

as a proportion of total revenues will increase as SAP increases its customer base. The increase in customer base will

mean constant increase in maintenance revenue even though revenue from new licenses may decline.

Resource Planning Software Gross Profit Margin (%)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0



2.

3.

INCREASE IN CUSTOMIZATION PROJECTS TO HELP PROFIT MARGINS

SAP has lower margins on standardized software licenses than on custom software projects. Many software

companies have similar margin profiles. SAP and other software companies incorporate custom projects as part of

their strategy to increase customer stickiness .

We foresee an increase in customization projects as clients use more and more complex systems and stand-alone SAP

products are insufficient for their requirements.

EXPANDING CUSTOMER BASE TO PRODUCE ECONOMIES OF SCALE As SAP expands its customer base, the input cost

will be divided among a larger base, which will mean that average costs will get reduced. This is the result of

economies of scale, which SAP could experience.


In addition, you can see the detailed P&L for the Resource Planning Software business in the Appendix (link)

Supply Chain Software The most important drivers for the Supply Chain Software business are:

SAP Market Share in Supply Chain Software

Supply Chain Management Software Market

Supply Chain Software Gross Profit Margin

SAP MARKET SHARE IN SUPPLY CHAIN SOFTWARE

SAP Market Share in Supply Chain Software represents the percentage of Global SCM software license revenue sales by

SAP.

Supply Chain Management or SCM is software which helps companies in the movement and storage of raw

materials, work-in-process inventory, and finished goods from point of origin to point of consumption.

Its primary competitors include Oracle, Infor, and i2 Technologies.

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Total Revenue (Bil $) 9.53 9.46 9.45 9.79 10.8 11.7 12.5 13.8 14.8 15.8 16.4

Resource Planning Software (% oftotal)

64.2 63.7 64.6 66.2 64.4 64.1 64.6 63.3 63.1 63.0 64.2

Indirect Expenses (% of total) 35.8 36.3 35.4 33.8 35.6 35.9 35.4 36.7 36.9 37.0 35.8

Direct Expense (Bil $) 1.14 1.17 1.14 1.26 1.38 1.50 1.62 1.75 1.85 1.95 2.04

Indirect Expense ($) n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

Adjusted EBITDA (Bil $) 8.39 8.29 8.31 8.53 9.41 10.2 10.9 12.1 13.0 13.8 14.3

Free Cash Flow (Bil $) n/a n/a n/a n/a 9.41 10.2 10.9 12.1 13.0 13.8 14.3


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1.

SAP is the market leader in the SCM space, with around 26% market share. SAP Market Share in Supply Chain

Software has increased from 21.8% in 2008 to 25.7% in 2014. Trefis forecasts that SAP Market Share in Supply Chain

Software will increase gradually throughout the forecast period, primarily because of the increasing integration of ERP

software with HANA and shift towards cloud deployments instead of on-premise offerings.

Forecast Rationale

COMPLETE DEVELOPMENT ON THE SOA PLATFORM SAP underscores its leadership in the SCM market with its

vision for enterprise SOA. Service Oriented Architecture or SOA is a platform which enables developers to reuse the

code and combine resources in a single suite to make it easy for companies to manage their applications. The

advantage of SOA is that if a business rule is changed, it will have to be changed at one place and that change will be

reflected across all software components throughout the company. Hence no need to rewrite different applications.

This help companies in tremendous cost savings. For example, when a company acquires another company, it will be

much easier for the parent company to integrate the data and software components of the acquired company into its

own systems if both companies' systems are built on SOA. SAP's competitors haven't completely ported their

applications to SOA, and hence lag behind SAP.


SUPPLY CHAIN MANAGEMENT SOFTWARE MARKET

Supply Chain Management Software Market represents the Global SCM software license revenue sales.

Supply Chain Management or SCM is software which helps companies in the movement and storage of raw

materials, work-in-process inventory, and finished goods from point of origin to point of consumption.

SAP Market Share in Supply Chain Software (%)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

5

1 0

1 5

2 0

2 5

3 0


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1.

Supply Chain Management Software Market has increased from $6.16 billion in 2008 to $9.8 billion by 2014. Trefis

forecasts that Supply Chain Management Software Market will increase at a moderate rate and reach $20 billion by 2021.

Forecast Rationale

NEED FOR ENTERPRISES TO CUT INPUT COSTS WILL DRIVE THE SCM MARKET There is an increasing need for

enterprises to cut raw material, inventory and storage costs, especially during the recessionary environment . SCM

software helps companies adopt a just-in-time inventory system, which allows them to reduce the amount of

inventory that they keep. It also helps in accurately forecasting demand for their products in the market.


SUPPLY CHAIN SOFTWARE GROSS PROFIT MARGIN



Supply Chain Management Software Market ($ Bil)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0



1.

2.

3.

The Supply Chain Software Gross Profit Margin increased from 79.4% in 2008 to 81.4% in 2013, but declined to 80.5% in

2014 due to adverse foreign currency movements.

Trefis forecasts that Supply Chain Software Gross Profit Margin will remain mostly stable over the forecast period.

Forecast Rationale















Supply Chain Software Gross Profit Margin (%)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021


Supply Chain Software (% of total) 64.2 63.7 64.6 66.2 64.4 64.1 64.6 63.3 63.1 63.0 64.2







1.

In addition, you can see the detailed P&L for the Supply Chain Software business in the Appendix (link)

Business Intelligence Software The most important drivers for the Business Intelligence Software business are:

SAP Business Intelligence Software Market Share

Global Business Intelligence Software Market

Business Intelligence Software Gross Profit Margin

SAP BUSINESS INTELLIGENCE SOFTWARE MARKET SHARE

SAP Business Intelligence Software Market Share represents the percentage of the Global Business Intelligence Software

(BI) market attributable to sales by SAP.

Business Intelligence software helps companies identify where to cut costs and locate growth opportunities.

SAP's primary competitors within Business Intelligence market include Oracle, SAS Institute, IBM and Microsoft.

SAP Business Intelligence Software Market Share has decreased from around 23.6% in 2008 to 20.8% in 2014, as per our

estimates. We believe that SAP Business Intelligence Software Market Share will decline slightly in the short term due to

high competition, but will cross 21% by the end of the forecast period.

Forecast Rationale

SAP SETTING HIGH BENCHMARKS WITH HANA Time and again SAP has announced that its in-memory is a

disruptive technology, which speeds up data storage and retrieval to unprecedented speeds. Leveraging the in-

memory technology is a software known as HANA (High Performance Analytic Appliance) that SAP released a few

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021


SAP Business Intelligence Software Market Share (%)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

5

1 0

1 5

2 0


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3.

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months back. HANA uses a different method of storing and retrieving data by storing it on computers CPU rather

than traditional way of reading and writing on storage disks. HANA has already exceed sales forecasts in 2011,

generating of around 160 million euros. On the other hand, Oracle has also made great strides over the last year or so

through the introduction of faster Exadata machines capable of producing millions of transactions quickly.

SAP BUSINESS OBJECTS HAS FASTER DATA PROCESSING SPEEDS SAP's Business Intelligence tool processes data at a

faster speed compared to some of its competitors, such that it can process millions of records within seconds.

SAP BUSINESS INTELLIGENCE TOOL HAS INTUITIVE INTERFACE SAP Business Intelligence interface is simple and can

be used by non-technical person in a company.


GLOBAL BUSINESS INTELLIGENCE SOFTWARE MARKET

Global Business Intelligence Software Market represents the Global Business Intelligence (BI) market.

BI software helps companies make better decisions by identifying areas where costs can be minimized and by locating

growth opportunities that can be leveraged.

The value of the Global Business Intelligence Software Market increased from $8.9 billion in 2008 to around $15.1 billion

by 2014. Trefis forecasts that Global Business Intelligence Software Market will continue to increase at a moderate rate in

line with recent years.

Forecast Rationale

BUSINESS INTELLIGENCE TOOL IS IMPORTANT FOR COMPANIES LOOKING FOR GROWTH OPPORTUNITIES Companies

generally lack the knowledge to make critical decisions like what product and when should it be launched so as to

maximize its benefits. BI software helps companies make decisions like:. The position of the company with respect to

its competitors. Changes in customer behavior and spending patterns. The capabilities of the company. Market

conditions, future trends, demographic and economic information. The social, regulatory, and political environment.

BUSINESS INTELLIGENCE BECOMES AN EVEN IMPORTANT TOOL DURING RECESSIONARY CONDITIONS During

Global Business Intelligence Software Market ($ Bil)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

5

1 0

1 5

2 0

2 5



1.

2.

3.

recessionary condition, BI becomes an even important tool for companies to identify areas of cost cutting and have

greater cost efficiencies from their existing processes and resources. It also helps in identifying and mitigating

business risks to the company when the economy is not doing well.


BUSINESS INTELLIGENCE SOFTWARE GROSS PROFIT MARGIN



The Business Intelligence Software Gross Profit Margin increased from 79.4% in 2008 to 81.4% in 2013, but declined to

80.5% in 2014 due to adverse currency movements.

We believe that Business Intelligence Software Gross Profit Margin will remain stable over the forecast period.

Forecast Rationale







companies have similar margin profiles. SAP and other software companies incorporate custom projects

as part of their strategy to increase customer stickiness .






Business Intelligence Software Gross Profit Margin (%)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0




In addition, you can see the detailed P&L for the Business Intelligence Software business in the Appendix (link)

Customer Relationship Software The most important drivers for the Customer Relationship Software business are:

SAP Market Share in Customer Relationship Software

Customer Relationship Software Market

Customer Relationship Software Gross Profit Margin

SAP MARKET SHARE IN CUSTOMER RELATIONSHIP SOFTWARE

SAP Market Share in Customer Relationship Software represents the percentage of Global CRM software license

revenue sales by SAP.

Customer Relationship Management or CRM is software which helps companies acquire and retain customers, and

gain marketing and customer insight.

SAP's primary competitors in this segment include Oracle, Salesforce.com, Microsoft, and Epicor.

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021


SAP Business Intelligence Revenue

(% of total)64.2 63.7 64.6 66.2 64.4 64.1 64.6 63.3 63.1 63.0 64.2






SAP Market Share in Customer Relationship Software (%)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210.0

2.5

5.0

7.5

10.0

12.5

15.0


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2.

SAP's market share in the global CRM market shrunk from 22.5% in 2008 to 11.9% in 2014 due to greater uptake of on-

demand CRM suites over on-premise software. SAP was the market leader in the CRM space in 2008, with around 22%

market share.

Trefis forecasts that SAP Market Share in Customer Relationship Software will decline gradually throughout the

forecast period, primarily because of the stiff competition from Salesforce and Oracle in this segment.

Forecast Rationale

THREAT FROM SOFTWARE AS A SERVICE OFFERINGS Players like Salesforce.com and Microsoft have increased SaaS

or Software as a Service offerings, which has seen tremendous growth . SaaS works on the on-demand principle. This

means that enterprises can license only the amount of software required versus the traditional way of procuring the

license per device. The service is provided through the Internet and the actual data and IT infrastructure reside with

the host and not the client. Hence, no expensive infrastructure investments are required from the client's side. The

solution can be run on a PC with an Internet connection and a web browser, while the software and data are stored

on the host servers. Thus, businesses can begin using the solution in no time . Since the entire infrastructure is

maintained by the host, SaaS allows companies to spend less money and effort on managing their IT solutions and

focus on their core competencies instead.

SAP'S SLOW DEVELOPMENT OF SAP BUSINESS BYDESIGN TO FURTHER DENT ITS MARKET SHARE SAP has been slow in

implementing its SaaS offering, which it has named Business ByDesign, and released it in 2010. SaaS market is

expected to show much faster growth than the on-premise market.


CUSTOMER RELATIONSHIP SOFTWARE MARKET

Customer Relationship Software Market represents the global Customer Relationship Management (CRM) software

market in terms of new license sales.

CRM is software that helps companies manage customer information in order better acquire and retain customers as

well as gain marketing and customer insight.

Customer Relationship Software Market ($ Bil)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

1 0

2 0

3 0

4 0

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1.

2.

Customer Relationship Software Market has increased from $9.15 billion in 2008 to around $23.5 billion in 2014. Gartner

forecasts that Customer Relationship Software Market will reach close to $37 billion by 2017. Trefis forecasts that

Customer Relationship Software Market will continue to increase at a strong rate and reach $58 billion by 2021.

Forecast Rationale

SAAS WILL BE THE MAIN DRIVER FOR THE CRM MARKET Software as a Service (SaaS) is a subscription-based service

where companies can access software online and pay only for the functionality utilized. This is oftentimes a cost

effective solution for companies, and suits small and medium enterprises more, as they have low IT budgets. In this

model, the software is generally hosted on the service provider's servers from where it can be easily accessed by users.

According to a Gartner report, the worldwide SaaS market increased from $6.4 billion in 2008 to $9.2 billion in 2010.

ADOPTION OF SOA COULD ALSO BENEFIT THE CRM MARKET SOA or Service Oriented Architecture is a platform

which enables developers to reuse the code and combine resources in a single suite so that it is easy for companies to

manage their applications. The advantage of SOA is that if a business rule is changed, it will have to be changed at

one place and that change will be reflected across all software components throughout the company. Hence no need

to rewrite different applications leading to IT cost savings. For example, when a company acquires another company,

it will be much easier for the parent company to integrate the data and software components of the acquired company

into its own systems if both companies' systems are built on SOA. CRM applications are increasingly built on SOA

architecture.


CUSTOMER RELATIONSHIP SOFTWARE GROSS PROFIT MARGIN



The Customer Relationship Software Gross Profit Margin increased from 79.4% in 2008 to 81.4% in 2013, but declined to

80.5% in 2014 due to adverse currency movements.

Customer Relationship Software Gross Profit Margin (%)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0


http://www.gartner.com/it/page.jsp?id=1223818http://www.gartner.com/it/page.jsp?id=1492814http://www.trefis.com/company?hm=SAP.trefis&division=0218&driver=0161&from=pdf:3&scroll=1http://www.trefis.com//company?hm=SAP.trefis&division=0218&driver=0165&from=pdf:3

1.

2.

3.

Trefis forecasts that Customer Relationship Software Gross Profit Margin will remain mostly stable over the forecast

period.

Forecast Rationale















In addition, you can see the detailed P&L for the Customer Relationship Software business in the Appendix (link)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021


Customer Relationship Software (%of total)

64.2 63.7 64.6 66.2 64.4 64.1 64.6 63.3 63.1 63.0 64.2


Direct Expense (Mil $) 432 450 487 543 598 657 721 784 849 915 989





http://www.trefis.com/company?hm=SAP.trefis&division=0218&driver=0165&from=pdf:3&scroll=1http://www.google.com

1.

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1.

Other Software The most important drivers for the Other Software business are:

Product Lifecycle & Other Software Revenue

Other Non-financial Liabilities (Non-current) as % of Revenue

Produce Lifecycle & Other Gross Profit Margin

PRODUCT LIFECYCLE & OTHER SOFTWARE REVENUE

Product Lifecycle & Other Software Revenue represents the revenues from Product Lifecycle Management and Supplier

Relationship Management products of SAP.

Product Lifecycle Management (PLM) - helps in managing the entire lifecycle of a product from its conception,

through design and manufacture, to service and disposal.

Supplier Relationship Management (SRM) - helps companies in reducing the procurement costs and better manage

supply bases.

Product Lifecycle & Other Software Revenue has increased from $0.6 billion in 2009 to $2.04 billion by 2014, as per our

estimates. Trefis forecasts that Product Lifecycle & Other Software Revenue will continue to increase at a moderate pace.

Forecast Rationale

SAP PLM HAS A COMPLETE SET OF FEATURES SAP PLM provides a complete set of features and applications that

can be used by companies during every phase of product development. It includes:. Idea Management. Product

Portfolio Management. Project Management. Product Manufacturing. Quality Management.

For example, PLM software helps companies embrace a real-time system, wherein workers from different

departments can access a centralized system. This software is typically used by the apparel and footwear industry,

which introduces a lot of products in a short span of time. The different departments are Product development,

Product sourcing and Product quality assurance. SAP's customers that have deployed its PLM software are industry

leaders. These include Siemens, VW, Hella, Tenneco Automotive, BMW, General Mills, Wella, Nestle, Welch

Product Lifecycle & Other Software Revenue ($ Bil)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

1

2

3

4


http://www.trefis.com//company?hm=SAP.trefis&division=0220&driver=0193&from=pdf:3

Allyn, HP, Smith & Nephew, Volvo Aero, KLM, EADS, Lilly, Bayer, and Henkel.


OTHER NON-FINANCIAL LIABILITIES (NON-CURRENT) AS % OF REVENUE

Other Non-financial Liabilities consist of various employee-related liabilities as well as other taxes such as value-added tax

liabilities and payroll tax liabilities.

Other Non-financial Liabilities (Non-current) as % of Revenue increased from 0.1% in 2008 to 1.4% in 2014.

We expect this percentage to increase throughout our review period, to reach 2% by 2021..

Forecast RationaleThe forecast for Other Non-financial Liabilities is based on historical trends for the company.


PRODUCE LIFECYCLE & OTHER GROSS PROFIT MARGIN

Gross Margin represents Gross Profit as a percentage of Revenue. Gross Profit is determined as Revenue minus Cost

of Goods and Services Sold.

Other Non-financial Liabilities (Non-current) as % of Revenue (%)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00


http://www.trefis.com/company?hm=SAP.trefis&division=0220&driver=0193&from=pdf:3&scroll=1http://www.trefis.com//company?hm=SAP.trefis&division=0220&driver=0583&from=pdf:3http://www.trefis.com/company?hm=SAP.trefis&division=0220&driver=0583&from=pdf:3&scroll=1

1.

2.

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The Produce Lifecycle & Other Gross Profit Margin increased from 79.4% in 2008 to 81.4% in 2013, but declined to 80.5%

in 2014 due to foreign exchange headwinds.

Trefis forecasts that Produce Lifecycle & Other Gross Profit Margin will remain mostly stable over the forecast

period.

Forecast Rationale















Produce Lifecycle & Other Gross Profit Margin (%)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021



Revenue (% of total)64.2 63.7 64.6 66.2 64.4 64.1 64.6 63.3 63.1 63.0 64.2


Direct Expense (Mil $) 538 763 858 494 534 563 580 596 607 615 621



In addition, you can see the detailed P&L for the Other Software business in the Appendix (link)

Professional Services The most important drivers for the Professional Services business are:

Consulting Revenue

Training & Other Revenue

Professional Services Gross Profit Margin

CONSULTING REVENUE

Consulting Revenue is the revenue from consulting activities such as requirement gathering, training implementation

partners etc.

Consulting revenue has dropped from $3.4 billion in 2008 $3.14 billion in 2012. It declined in 2013 to $2.98 billion and

dropped further to $2.5 billion in 2014. The fall in revenue was because of lower consulting revenues associated with cloud-

based software and adverse currency movements.

Going forward, we expect it to decline to $2.26 billion by the end of our forecast period, as proportion of cloud

business grows.

Forecast Rationale

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021




Consulting Revenue ($ Bil)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210.0

0.5

1.0

1.5

2.0

2.5

3.0


http://www.google.comhttp://www.trefis.com//company?hm=SAP.trefis&division=0013&driver=0095&from=pdf:3

1.

We expect consulting revenue to decline as SAP enters into new businesses and introduces software in areas such as cloud

based CRM, ERP and social media analytics. These segments have low consulting revenues associated with them as the

bulk of the revenue is derived in the form of subscription charges. Therefore, as the proportion of cloud in SAP's total

revenue grows, we expect consulting revenue to decline in the future.


TRAINING & OTHER REVENUE

Training & Other Revenue represents the revenues from the Education department of SAP.

The segment consists of instructor-led, media-based, and Internet-based training for SAP's software products.

Training & Other Revenue declined from $0.9 billion in 2008 to $0.7 billion in 2014. However in Euro terms (reporting

currency), the decline was negligible. Trefis forecasts that Training & Other Revenue will increase at a moderate, but

declining rate.

Forecast Rationale

SAP CERTIFICATION COURSES ARE IN HIGH DEMAND Companies who have implemented SAP products at their

premises require skilled professionals to manage their SAP application infrastructure. This creates a huge demand for

people having certified knowledge of SAP's suite of products (currently called Business Suite 7).


PROFESSIONAL SERVICES GROSS PROFIT MARGIN



Training & Other Revenue ($ Bil)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210.00

0.25

0.50

0.75

1.00

1.25


http://www.trefis.com/company?hm=SAP.trefis&division=0013&driver=0095&from=pdf:3&scroll=1http://www.trefis.com//company?hm=SAP.trefis&division=0013&driver=0097&from=pdf:3http://www.trefis.com/company?hm=SAP.trefis&division=0013&driver=0097&from=pdf:3&scroll=1

1.

The Professional Services Gross Profit Margin decreased from 26.5% in 2008 to 12.1% in 2014. Trefis forecasts that

Professional Services Gross Profit Margin will decline slightly by the end of our review period.

Forecast Rationale

PROFESSIONAL SERVICES SEGMENT TO BE CLUBBED TOGETHER WITH OTHER SERVICES UNDER ONE SERVICE APPROACH

In 2014 fourth quarter results, SAP announced that with effect from the first quarter of 2015, it will club all services,

including cloud subscriptions, under a common umbrella. Consequently, it will no longer distinguish between

consulting services and the premium professional services. This will result in a decline in margins as SAP will no

longer charge higher rates for professional services.


Professional Services Gross Profit Margin (%)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

5

1 0

1 5

2 0

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021


Consulting Revenue (% of total) 69.5 70.9 70.5 71.9 70.1 68.9 66.9 64.2 62.0 59.9 58.4


Training & Other Revenue (% oftotal)

17.0 17.9 19.6 21.0 23.1 25.4 27.5 29.6 31.5 32.9 34.1




Free Cash Flow (Mil $) n/a n/a n/a n/a 556 456 461 517 564 640 701



In addition, you can see the detailed P&L for the Professional Services business in the Appendix (link)


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Learn More

About Trefis

Trefis.com was founded by MIT engineers and former Wall Street analysts who realized that most people do not

understand the seemingly familiar companies around them including well known companies like Apple, Google, Coca

Cola, GE, Ford and Gap to name a few.

The Trefis platform uses extensive data to show in a single snapshot what drives the value of a company's business.

We move beyond the qualitative notion "if you love the coffee at Dunkin Donuts, you should think about buying the

stock," to answer quantitative questions like "If their coffee sales are up 10% next year but doughnut sales are down 5%,

what happens to the value of the company?"

Trefis analysts spend weeks evaluating each stock that we cover and utilize commonly used valuation methodologies

to determine a Trefis price for each company. We present you with not only our synthesized view but also every single

step within the valuation process used to determine the Trefis price which you can see via our interactive analysis on

Trefis.com.

Learn more about the Trefis story

Read the Trefis FAQ


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Appendix

Summary P&L for SAP

Summary P&L for SAP

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Total Revenues (Bil $) 29.2 31.0 32.9 29.8 32.8 35.4 37.9 41.6 44.7 48.0 50.4


32.6 30.5 28.7 32.8 32.9 33.0 33.1 33.2 33.1 32.9 32.5


Business Intelligence Software (% oftotal)

15.4 14.7 14.4 15.9 15.8 15.7 15.6 15.6 15.7 15.9 16.1


12.4 11.8 12.3 14.1 14.3 14.5 14.7 14.9 15.1 15.3 15.7

Other Software (% of total) 15.4 20.0 21.7 12.9 12.7 12.4 11.8 11.3 10.8 10.3 9.83

Professional Services (% of total) 16.0 14.3 12.8 11.5 10.2 9.36 8.92 8.47 8.14 7.84 7.66

Direct Expenses (Bil $) 6.06 6.51 6.64 6.20 6.56 6.98 7.38 7.82 8.24 8.62 8.99


36.2 33.9 31.6 36.1 35.9 35.8 35.7 35.7 35.5 35.1 34.6



17.1 16.3 15.8 17.5 17.2 17.1 16.9 16.8 16.9 17.0 17.1


13.8 13.1 13.6 15.5 15.5 15.7 15.9 16.0 16.2 16.4 16.7





36.2 33.9 31.6 36.1 35.9 35.8 35.7 35.7 35.5 35.1 34.6



17.1 16.3 15.8 17.5 17.2 17.1 16.9 16.8 16.9 17.0 17.1


13.8 13.1 13.6 15.5 15.5 15.7 15.9 16.0 16.2 16.4 16.7



Indirect Expenses ($) n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a


n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

Supply Chain Software (% of total) n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a





Other Software (% of total) n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a


Detailed P&L for the Resource PlanningSoftware business The most important drivers for the Resource Planning Software business are discussed above, here is the detailed P&L.

Summary P&L for SAP continued

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Professional Services (% of total) n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a



n/a n/a n/a n/a 35.9 35.8 35.7 35.7 35.5 35.1 34.6

Supply Chain Software (% of total) n/a n/a n/a n/a 15.4 16.3 17.1 17.7 18.3 18.9 19.4


n/a n/a n/a n/a 17.2 17.1 16.9 16.8 16.9 17.0 17.1


n/a n/a n/a n/a 15.5 15.7 15.9 16.0 16.2 16.4 16.7

Other Software (% of total) n/a n/a n/a n/a 13.9 13.5 12.8 12.2 11.6 11.0 10.5

Professional Services (% of total) n/a n/a n/a n/a 2.12 1.61 1.51 1.53 1.55 1.63 1.69

Resource Planning Software: Detailed P&L

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Revenues

Resource Planning Software (Bil $) 6.11 6.03 6.10 6.48 6.95 7.49 8.09 8.74 9.35 9.95 10.5

SAP Market Share in Resource

Planning Software (%)25.5 24.6 24.0 24.0 23.8 23.6 23.5 23.5 23.5 23.6 23.8


Market ($ Bil)24.0 24.5 25.4 27.0 29.3 31.7 34.4 37.1 39.7 42.1 44.2


R&D as a % of Gross Profit (%) 19.6 20.2 19.3 19.0 18.5 18.2 18.3 18.4 18.4 18.4 18.4

SG&A as a % of Gross Profit (%) 38.4 43.5 42.2 42.3 42.5 42.4 42.3 42.3 42.3 42.4 42.5

Stock Comp. as a % of Gross

Profit (%)0.47 0.13 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Effective Tax Rate (%) 28.2 26.8 24.8 25.0 25.6 26.0 26.2 26.4 26.6 26.8 27.0

CapEx as a % of Gross Profit (%) 4.50 4.85 4.79 6.00 7.75 9.25 10.5 11.0 11.5 11.7 12.0

Account Receivable Days (Current) 83.3 90.5 87.5 92.9 92.0 93.3 88.8 87.4 87.1 87.3 87.5

Other Non-financial Assets

(Current) as % of Revenue1.22 1.86 2.14 2.54 2.83 3.08 3.43 3.72 4.01 4.31 4.60

Account Payable Days (Current) 22.3 20.1 19.5 21.6 18.5 17.5 19.7 16.2 18.5 20.2 20.0

Other Non-financial Liabilities


Deferred Income (Current) as % ofRevenue

6.83 8.77 8.80 9.88 10.8 11.4 12.3 13.0 13.8 14.6 15.4

Account Receivable Days (Non-current)

2.00 2.03 2.21 2.14 2.26 2.30 2.26 2.27 2.28 2.25 2.23


Detailed P&L for the Supply Chain Softwarebusiness The most important drivers for the Supply Chain Software business are discussed above, here is the detailed P&L.

Resource Planning Software: Detailed P&L continued

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Other Non-financial Assets (Non-current) as % of Revenue

0.25 0.43 0.66 0.96 1.06 1.18 1.33 1.47 1.58 1.71 1.83

Account Payable Days (Non-current)

1.03 1.46 1.01 1.18 1.16 1.14 1.18 1.20 1.15 1.17 1.19


(Non-current) as % of Revenue0.60 0.62 0.69 1.36 1.50 1.55 1.63 1.72 1.82 1.92 2.01

Deferred Income (Non-current) as% of Revenue

0.29 0.39 0.46 0.46 0.45 0.44 0.48 0.50 0.51 0.52 0.53


Expenses



Gross Profit Margin (%)81.4 80.6 81.4 80.5 80.1 80.0 80.0 80.0 80.2 80.4 80.6


Total Expenses ($) n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a



Supply Chain Software: Detailed P&L

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Revenues

Supply Chain Software (Bil $) 1.54 1.72 2.14 2.52 2.98 3.41 3.88 4.34 4.83 5.36 5.91

SAP Market Share in Supply

Chain Software (%)20.0 20.7 23.9 25.7 27.2 28.0 28.5 28.8 29.1 29.2 29.2

Supply Chain Management

Software Market ($ Bil)7.70 8.33 8.94 9.80 10.9 12.2 13.6 15.0 16.6 18.3 20.2





Profit (%)0.47 0.13 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00





Supply Chain Software: Detailed P&L continued

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021







6.83 8.77 8.80 9.88 10.8 11.4 12.3 13.0 13.8 14.6 15.4


2.00 2.03 2.21 2.14 2.26 2.30 2.26 2.27 2.28 2.25 2.23


0.25 0.43 0.66 0.96 1.06 1.18 1.33 1.47 1.58 1.71 1.83


1.03 1.46 1.01 1.18 1.16 1.14 1.18 1.20 1.15 1.17 1.19




0.29 0.39 0.46 0.46 0.45 0.44 0.48 0.50 0.51 0.52 0.53


Expenses


Supply Chain Software Gross

Profit Margin (%)81.4 80.6 81.4 80.5 80.1 80.0 80.0 80.0 80.1 80.3 80.5






Detailed P&L for the Business IntelligenceSoftware business The most important drivers for the Business Intelligence Software business are discussed above, here is the detailed P&L.

Business Intelligence Software: Detailed P&L

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Revenues

SAP Business Intelligence Revenue

(Bil $)2.88 2.90 3.06 3.15 3.34 3.56 3.82 4.11 4.44 4.81 5.21

SAP Business Intelligence

Software Market Share (%)23.4 21.8 21.3 20.8 20.6 20.5 20.5 20.6 20.8 21.0 21.3

Global Business Intelligence

Software Market ($ Bil)12.3 13.3 14.4 15.1 16.2 17.4 18.7 20.0 21.4 22.8 24.4





Profit (%)0.47 0.13 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00










6.83 8.77 8.80 9.88 10.8 11.4 12.3 13.0 13.8 14.6 15.4


2.00 2.03 2.21 2.14 2.26 2.30 2.26 2.27 2.28 2.25 2.23


0.25 0.43 0.66 0.96 1.06 1.18 1.33 1.47 1.58 1.71 1.83


1.03 1.46 1.01 1.18 1.16 1.14 1.18 1.20 1.15 1.17 1.19




0.29 0.39 0.46 0.46 0.45 0.44 0.48 0.50 0.51 0.52 0.53


Expenses


Business Intelligence Software




Detailed P&L for the Customer RelationshipSoftware business The most important drivers for the Customer Relationship Software business are discussed above, here is the detailed

P&L.

Business Intelligence Software: Detailed P&L continued

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021




Customer Relationship Software: Detailed P&L

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Revenues

Customer Relationship Software (Bil$)

2.32 2.33 2.62 2.79 3.01 3.28 3.60 3.92 4.26 4.64 5.07

SAP Market Share in Customer

Relationship Software (%)14.5 12.9 12.8 11.9 11.1 10.4 9.86 9.41 9.06 8.81 8.66


Market ($ Bil)16.1 18.0 20.5 23.5 27.2 31.5 36.5 41.6 47.0 52.7 58.5





Profit (%)0.47 0.13 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00










6.83 8.77 8.80 9.88 10.8 11.4 12.3 13.0 13.8 14.6 15.4


2.00 2.03 2.21 2.14 2.26 2.30 2.26 2.27 2.28 2.25 2.23


0.25 0.43 0.66 0.96 1.06 1.18 1.33 1.47 1.58 1.71 1.83


1.03 1.46 1.01 1.18 1.16 1.14 1.18 1.20 1.15 1.17 1.19




Detailed P&L for the Other Softwarebusiness The most important drivers for the Other Software business are discussed above, here is the detailed P&L.

Customer Relationship Software: Detailed P&L continued

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021


0.29 0.39 0.46 0.46 0.45 0.44 0.48 0.50 0.51 0.52 0.53


Expenses

Direct Expenses (Mil $) 432 450 487 543 598 657 721 784 849 915 989







Other Software: Detailed P&L

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Revenues


Revenue (Bil $)2.89 3.94 4.61 2.54 2.69 2.81 2.90 2.98 3.05 3.12 3.18

Product Lifecycle & Other

Software Revenue ($ Bil)2.89 3.94 4.61 2.54 2.69 2.81 2.90 2.98 3.05 3.12 3.18





Profit (%)0.47 0.13 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00










6.83 8.77 8.80 9.88 10.8 11.4 12.3 13.0 13.8 14.6 15.4


Detailed P&L for the Professional Servicesbusiness The most important drivers for the Professional Services business are discussed above, here is the detailed P&L.

Other Software: Detailed P&L continued

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021


2.00 2.03 2.21 2.14 2.26 2.30 2.26 2.27 2.28 2.25 2.23


0.25 0.43 0.66 0.96 1.06 1.18 1.33 1.47 1.58 1.71 1.83


1.03 1.46 1.01 1.18 1.16 1.14 1.18 1.20 1.15 1.17 1.19




0.29 0.39 0.46 0.46 0.45 0.44 0.48 0.50 0.51 0.52 0.53


Expenses

Direct Expenses (Mil $) 538 763 858 494 534 563 580 596 607 615 621

Produce Lifecycle & Other Gross

Profit Margin (%)81.4 80.6 81.4 80.5 80.1 80.0 80.0 80.0 80.1 80.3 80.5





Professional Services: Detailed P&L

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Revenues

Consulting Revenue (Bil $) 3.26 3.14 2.98 2.46 2.34 2.28 2.26 2.26 2.26 2.26 2.26

Consulting Revenue ($ Bil) 3.26 3.14 2.98 2.46 2.34 2.28 2.26 2.26 2.26 2.26 2.26





Profit (%)0.47 0.13 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00







Professional Services: Detailed P&L continued

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021





6.83 8.77 8.80 9.88 10.8 11.4 12.3 13.0 13.8 14.6 15.4


2.00 2.03 2.21 2.14 2.26 2.30 2.26 2.27 2.28 2.25 2.23


0.25 0.43 0.66 0.96 1.06 1.18 1.33 1.47 1.58 1.71 1.83


1.03 1.46 1.01 1.18 1.16 1.14 1.18 1.20 1.15 1.17 1.19




0.29 0.39 0.46 0.46 0.45 0.44 0.48 0.50 0.51 0.52 0.53

Training & Other Revenue (Bil $) 0.80 0.79 0.83 0.72 0.77 0.84 0.93 1.04 1.15 1.24 1.32

Training & Other Revenue ($ Bil) 0.80 0.79 0.83 0.72 0.77 0.84 0.93 1.04 1.15 1.24 1.32


Expenses


Professional Services Gross Profit

Margin (%)22.9 17.8 16.3 12.1 10.6 8.58 8.58 9.08 9.58 10.6 11.6




Free Cash Flow (Mil $) n/a n/a n/a n/a 556 456 461 517 564 640 701


SAPResource Planning SoftwareSAP Market Share in Resource Planning SoftwareResource Planning Software MarketResource Planning Software Gross Profit Margin

Supply Chain SoftwareSAP Market Share in Supply Chain SoftwareSupply Chain Management Software MarketSupply Chain Software Gross Profit Margin

Business Intelligence SoftwareSAP Business Intelligence Software Market ShareGlobal Business Intelligence Software MarketBusiness Intelligence Software Gross Profit Margin

Customer Relationship SoftwareSAP Market Share in Customer Relationship SoftwareCustomer Relationship Software MarketCustomer Relationship Software Gross Profit Margin

Other SoftwareProduct Lifecycle & Other Software RevenueOther Non-financial Liabilities (Non-current) as % of RevenueProduce Lifecycle & Other Gross Profit Margin

Professional ServicesConsulting RevenueTraining & Other RevenueProfessional Services Gross Profit Margin

Learn MoreAppendixSummary P&L for SAPResource Planning SoftwareSupply Chain SoftwareBusiness Intelligence SoftwareCustomer Relationship SoftwareOther SoftwareProfessional Services

SAP_2015-01-30

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