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25 IT Investment Research Facts You Need to Know about SAP: A 2005 Year in Review with 2006 Outlook
IT Investment Research, June 2006, Pages: 100
This is a complete review of SAP's 2005 results and 2006-2010 plans based on SAP's 20-F filing,which SAP released in March 2006.
It is no great revelation that SAP is betting the farm on its NetWeaver infrastructure software. But in my opinion that is not the most important IT investment opportunity, risk, or observation outlined in their March 2006 SEC 20F filing. In fact, the dependence on the NetWeaver strategy does not even make the top of the list of SAP's 25 IT Investment Research facts you need to know.
What is more important to understand as laid out in SAP's SEC 20F filing and explained in this document is that 'NetWeaver is an almost 10 year old technology.' That is not necessarily a bad thing and in its attempt to transform NetWeaver into a business process platform, SAP is playing to the company's strength.
That stremgth is that 'SAP is the long-time but little recognized leader in business process management (BPM).' Many investors consider BPM new functionality because a new technology has emerged in recent years to enable it. Understanding the basis for SAP's past leadership in BPM and the changing dynamics of BPM demand based on new ways of doing business is another important SAP IT investment factor.
So is the fact that 'SAP no longer cares about ERP, CRM, PLM, SCM, and SRM.' In January 2006 SAP said it will stop measuring the company's results by those 'solutions' metrics, concentrating instead on its industry metrics. The real secret to SAP's meteoric growth during the 1990s was its industry specificity first and its solution set only to the extent that that set was oriented to various industries. But that might be all for naught because 'It is not clear that SAP understands and/or assimilates culturally the sea change in the software market.' And if SAP does not understand the change and react correctly, by 2020 it will go the way of SSA, McCormick & Dodge, Computer Associates, and other application software companies that have faded from the scent despite the fact that they were larger than SAP as recently as 1990.
This document reviews all of the key verbatims from SAP's annual SEC filing in detail with both technical explanations that we think investors will find helpful and opinions, if warranted, that investors may find actionable. The four SAP IT Investment Research Facts mentioned above are explained in more detail and 21 other Research Facts are included. SAP's own words are the source for these facts and analyses.
We urge you to read a company's SEC and like material in detail if you are considering investing in any information technology (IT) company including SAP. Reading SEC and like documentation has two advantages:
- First, it is the most accurate description of the opportunity and risk (guys are going to jail for lying in these filings and like material so most executives are going to great length to ensure accuracy)
- Second, the documentation is very complete in terms of describing both the financial and technology aspects of an investment opportunity.
However the detail is technically complicated for many investors. The purpose of this analysis is to explain the most relevant technical aspects of the investment opportunity in terms investors can better understand. This deliverable also explains the technical statements' relevance to the other information provided in the SEC and like documentation.
This analysis is NOT investment advice nor does it attempt to explain the financial aspects of the investment (although some revenue claims are explained in order to put the IT investment opportunity in context).
About the Author
Dennis Byron has more than 30 years experience researching and analyzing all areas of information technology (IT) and information-systems use. He conducted software and systems industry research and analysis at the Datapro division of McGraw-Hill from 1991 to 1997 and IDC from 1997 to 2006. At Datapro he was involved with the creation of, and later managed, the Client/Server Analyst research service. Byron joined IDC in 1997 to manage research into industry-specific applications, and initiated IDC research into eCommerce, retail, and professional-services applications, and the automation of the services supply chain. In early 2003, he moved to conduct the IDC's analysis of application and integration server software and related middleware, and the emerging market for business process management (BPM) software. Before he began research and analysis for Datapro, he spent 20 years in information-technology marketing at Bull SA and the former Data General Corporation.
He has consulted in the deployment and marketing of technology ranging from CICS to simple RPC decomposition tools to the first ORBs to later generations of Tuxedo, to DCOM and IBM's Project San Francisco. Some of this research supported the commercial marketing of Multics in the 1970s, the launch of the 'Soul of A New Machine' in the 1980s (the ‘machine,’ not the book), and business process reengineering (BPR) software in the 1990s. He has conducted over 500 specific information-systems case studies. Mr. Byron also was a columnist for Application Development Trends magazine and has written extensively on the I-T industry standards movement, from the early use of PARS to the de facto and de jure agreements behind the burgeoning use of web services architectures and SOA.
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25 IT Investment Research Facts You Need to Know about SAP - A 2005 Year in Review with 2006 Outlook
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