VENDOR PROFILE

SAP AG, INC.


 

September 21, 1995

Prepared By:

Workgroup Strategic Services, Inc.

75 Congress Street

Portsmouth, N.H. USA 03801

603 - 431 - 4409

1.0 Study Objectives and Scope

This report outlines and analyzes the significant issues that surround the success of SAP AG, in particular the recent growth of its subsidiary SAP America. Further, this study:

Research Methodology

Workgroup Strategic Services' SAP vendor profile attempts to delineate the success factors underlying SAP's growth in both revenue and market share and to profile SAP's relationship and use of partners for the myriad elements of the consulting, sales, and integration of its R/3 application suite. Workgroup Strategic Services sought to determine the scope of the relationships within the sales cycle as SAP and its partners drive sales and provide consulting and implementation services.

Primary research for this report included extensive telephone interviews with executives from SAP, its partners, executives from competing software providers, and end user customers. Secondary research material includes trade publications, SAP brochures and press releases, competitor product brochures and press releases, and searches via on-line services.

The information contained in this edition of this vendor profile is current as of September 17, 1995. Many of the issues and strategies of SAP are still evolving. It is expected that SAP will continue to add to its software and service portfolios and to develop a more broad based strategic identity.

2.0 Executive Summary

Introduction to SAP

Four years ago, SAP AG was a virtual unknown outside of its European base. In 1992, SAP announced its R/3 suite of applications that moved SAP AG into the leading position as a supplier in client/server solutions.

SAP's R/3 system addressed the growing importance of the open systems arena. The R/3 system's multi-language support combined with its database and hardware platform support quickly escalated R/3 sales beyond its predecessor, R/2.

R/3 provides an integrated set of applications and tools for managing business data. It consists of hundreds of business processes for running mid-to-large applications in material management, sales and distribution, financial accounting and human resources. R/3 utilizes a 3-tier client/server concept that requires a re-engineering of an individual business' processes in accordance with R/3. Installation is lengthy and requires a team of dedicated internal and external resources because the 3-tier client/server architecture uncouples applications logic from the user interface and the database. Today, SAP AG has become the sixth largest independent software company in the world with over 4,500 sites in 41 countries that rely on SAP solutions. The company is based in Walldorf, Germany and employs over 6,100 people worldwide. SAP AG recently reported revenues of US$1.1B in 1994.

SAP is in an excellent position to continue achieving above average growth and maintain a significant portion of the client/server segment in the upcoming years due to the profitability of its platform partners such as IBM, HP and Seimens Nixdorf and significant untapped market potential. Also, the company is continuing to expand its global presence in new emerging markets such as South America while emphasizing growth in established countries like Japan. The Heidelberg project, the code name for an easy to install and configure version of R/3, will widen the company's target customer base into medium-sized companies, although this would admittedly involve higher sales and marketing costs. However, the success of the Heidelberg project is dependent upon product positioning and channel strategy.

Even assuming that the buoyancy of new business wanes, long-term growth is assured thanks to the increasing number of functions to be incorporated in the R/3 system and its new pricing concept, which is no longer based on the size of programs installed, but on the number of users per customer. Workgroup Strategic Services expects that SAP's strategy will increase SAP AG's worldwide customer sites from an estimated 4500 sites in 1995 to over 8600 sites by 1999 while maintaining an average annual growth rate of 17%.

Markets in which SAP is already very successful promise further growth in the form of additional installations, consultant services and training. SAP is preparing for this prolific growth by adding another 200 customer service and support staff and setting up nine customer training centers in the US. Further, approximately 5,000 consultants will be trained for SAP systems in 1995, in addition to the 2,200 trained in 1994.

Sales Strategy

SAP sells its R/3 application suite through its direct sales force only. SAP does not provide any installation services, consulting or other services to the client. SAP remains neutral regarding hardware and implementation needs for the customer. SAP does have a very robust partnership program to provide its customers with myriad choices for the system hardware, database architecture, and consulting and implementation providers used for the installation of its R/3 software. To clarify the relationship between the partners and SAP, the company has developed a tiered structure for its implementation partners, as well as specifically defined relationships for hardware platform vendors and database or technology partners.

Findings: Summary of Strengths - Weaknesses - Opportunities - Threats (S.W.O.T.) Analysis

SAP's Strengths

SAP's Weaknesses

SAP's Opportunities

SAP's Threats

3.0 Company Overview

Four years ago, SAP AG (Systems Analysis and Program Development) was virtually an unknown outside of its European base. The company was extremely successful in its own familiar settings with a main-frame product known as R/2. However, in 1992, SAP AG brought to market a client/server product known as the R/3 System that allowed the company to take advantage of the downsizing movement. This, combined with the company's strategic focus of expanding sales into the US market, caused the company's sales to surge, putting SAP AG in the leading position as a supplier in client/server solutions. The open concept of the R/3 product allowed the company to expand its strictly mainframe customer base to a market that is ten times larger than its predecessor.

Today, SAP AG has become the sixth largest independent software company in the world and is known for specializing in standard software for management purposes (i.e. financial accounting, order and supply of materials, production planning), including training and consultancy services. Today, SAP AG has over 4,500 sites in 41 countries that rely on SAP solutions. The company is based in Walldorf, Germany and recently reported revenues of US$1.1B in 1994 and employs over 6,100 people worldwide.

4.0 Product Overview

R/2 System Solution

The R/2 System is an integrated, mainframe application that is designed to meet the information management needs of data-intensive environments. The R/2 System has 10 main modules that address corporate information management: sales and distribution, production planning and control, materials management, quality assurance, plant maintenance, human resources, financial accounting, assets accounting, cost and managerial accounting and projects planning. R/2 optimizes the high volume transaction processing capability of IBM and PCM mainframes and runs on only very select configurations as illustrated in Table 1.

Table 1

R/2 Configurations

Hardware

Operating System

Data Communications

Database

IBM 370/390 & compatibles

VSE/SP

CICS

VSAM

 

 

 

DL1

 

 

 

ADBAS

 

MVS, MVS/XA

CICS

VSAM

 

 

IMS/DC

IMS/DB

 

 

 

ADABAS

 

 

 

DB2

 

MVS/ESA

CICS

VSAM

 

 

IMS/DC

IMS/DB

 

 

 

ADABAS

 

 

 

DB2

Source: SAP America, Inc.

During mid-1992, SAP changed its strategic direction with the announcement of the R/3 System which addressed the growing importance of the open systems arena. The R/3 system's multi-language support combined with its database and hardware platform support quickly escalated R/3 sales beyond R/2. While R/3 sales continue to surge forth and R/2 sales dwindle, the R/2 platform remains a viable alternative (see Figure 1) to many corporations that have centralized, data intensive requirements including materials manufacturing, petroleum production and pharmaceutical products. There remain thousands of R/2 customers with some highly identifiable names as illustrated in Table 2. SAP plans on continuing to support the 2100 R/2 customers until the year 2000 and will release periodic technical updates; however, their strategic focus remains with the R/3 System.

Table 2

R/2 Customers

Amoco Chemical

Harnischfeger

PolyGram Records, Inc.

Cincinnati Gas and Electric

H.J. Heinz Company

Schindler Elevator Corp.

Dupont USA

Himont

Shell Oil Company

Dow Chemical

Hunt Wesson, Inc.

Stockhausen, Inc.

Eastman Chemical Company

ICI Americas, Inc.

Teradata Contract

Ford New Holland

L&F Products

Timken

General Mills, Inc.

Lee Company

Westvaco

Goodyear Tire and Rubber

Olin Corporation

Witco

Haarmann & Reimer's

Ortho Pharmaceuticals

 

Source: SAP America, Inc.

R/3 Systems Solution

SAP's R/2 provides complete operational process and financial control while the newer R/3 systems offers the same facilities under an "open systems" concept; i.e. it works with a variety of computing platforms. R/3 encompasses the functionality of the R/2 System; however, with added benefits of portability, inter-operability and scalability. Further, R/3 is designed to help companies meet their next strategic challenge: technology re-engineering. Companies using the R/3 System can promote business process change while taking advantage of the improving price/performance ratios of hardware platforms, relational database technologies and open systems standards. In addition to product quality (highly functional compared with other products available), the essential factors in R/3's success are its availability in over 16 languages and adherence to legal requirements in individual countries, as well as distribution agreements entered with all the major hardware manufacturers and consultancies.

Source: SAP America, Inc. and Workgroup Strategic Services, Inc.

As demonstrated in Table 3, R/3 runs under a wide range of configurations, operating systems and database applications. Currently, R/3 runs on a variety of UNIX platforms, Microsoft NT and Digital's Open VMS. Client support includes IBM OS/2, Microsoft Windows 3.1 and NT and UNIX with the Motif graphic user interface (GUI). Also, R/3 runs on Oracle, Informix DBMS and offers support for Sybase DBMS and Microsoft's SQL Server. R/3's ability to share data with a variety of third party tools including Microsoft Access and Visual Basic, Oracles Forum and Powersoft's PowerBuilder has helped to propel its sales and acceptance.

Table 3*

R/3 Configurations

Hardware

Operating System

Database

Dialog

 

 

 

 

Bull

BOS

Oracle

OSF/MOTIF

Data General

DG-UX

Oracle

OSF/MOTIF

Digital

ULTRIX

Informix

Presentation Manager, Windows 3.1

HP

HP-UX

 

Windows 3.1

IBM

AIX

 

 

SNI

SINIX

 

 

HP3000

MPE/iX

ORACLE

OSF/MOTIF

 

 

Allbase

Presentation Manager, Windows 3.1

Sun

Solaris

ORACLE

OSF/MOTIF

 

 

 

Presentation Manager, Windows 3.1

Intel based**

Windows NT

ORACLE

OSF/MOTIF Presentation Manager

*List not complete

**certified platforms include AST, AT&T, Compaq and Sequent among others.

Source: SAP America, Inc.

R/3 Description

R/3 provides an integrated set of applications and tools for managing business data. It consists of hundreds of business processes for running mid-to-large applications in material management, sales and distribution, financial accounting and human resources (See R/3's Core Solution). R/3 utilizes a 3-tier client/server concept that requires a re-engineering of an individual business process in accordance with R/3. Installation is lengthy and requires a team of dedicated internal and external resources because the 3-tier client/server architecture uncouples applications logic from the user interface and the database.

The 3-Tier Client/Server Concept

The R/3 System breaks the information structure of organizations into three levels: database, application and presentation as demonstrated in Figure 2. Each piece is designed to support the demands of its function. Databases form the highest computing level and reside on a centralized server, typically a mainframe computer. Beneath the first level falls the Application servers which hold the processing logic of the system, preparing and formatting information from the database level for individual offices or departments. The third level is the client workstations and PCs which handle all the tasks related to the presentation for data, user interfaces and enable easy access to company applications and data. Using a three tier structure, R/3 attempts to maximize the power on each level while creating an environment that offers the flexibility to be modified with the environment.

Figure 2

R/3 Three-Tier Architecture Chart

Source: SAP America, Inc.

R/3's Core Solution

R/3 is designed for ease of use by staff at all levels. The GUI interface is in accordance with international standards, including windows, toolbars and graphic capabilities. The screen formats can be adapted to suit the tasks performed at any particular workplace. R/3 Core solutions include Sales & Distribution, Financial and Accounting, Human Resources and Manufacturing and Logistics.

Sales and Distribution

The Sales and Distribution module includes components for sales, shipping, billing, sales support and sales information that provides real-time, on-line access to sales information while streamlining order entry, delivery and billing functions. This module can be integrated with SAP's Materials Management and Production Planning modules.

Financial Accounting

This module entails the support of all the planning, administration and processing responsibility of human resource departments. Company specific organization structures and administrative policies are integrated into the standard applications, complete with a multi-level, graded authorization concept to control access to sensitive data.

Asset Management - allows users to monitor assets such as office machines, computers, software; does fixed asset reporting, maintenance and depreciation for companies on a worldwide basis.

Financial Accounting - comprised of general ledger, accounts receivable/payable, legal consolidation, financial control, profitability analysis, business planning and coordination.

Controlling (Management Accounting) - comprised of cost center accounting, activity based costing, order and project accounting, product accounting, profitability analysis, profit center accounting, and corporate management, which combined, coordinate planning, monitoring and management of business activities.

Human Resources

The HR Systems can be integrated with other SAP applications to connect core business operations from human resources to the financial and manufacturing systems and covers all phases of the human resource cycle from selection and administration applications to career planning. The Human Resource system features such capabilities as the ability to scan resumes into the system and query the system for specific skills or qualifications. The system also extracts and analyzes the information in categories such as work history, skill and experience. Also, integrated is Interactive Voice Response (IVR) capability which allows callers to retrieve specific and unique information from a host computer by responding to voice prompts given through a touch tone phone. The added technology was a benefit from relationships from Resumix, Inc who is a leader in integrated staffing solutions and Computer Communications Specialists who specializes in IVR technology.

The Human Resources module has received high recognition, for example the HR Executive listed SAP's R/3 HR System as one of the top 10 products in 1993. During 1993, the HR System was installed in over 100 companies worldwide. In 1994, SAP had 549 HR customers for the R/2 Systems and 225 HR customers for the R/3.

Applicant Data Administration - manages job applications.

Master Data Management - manages personnel related data.

Payroll - supports all payroll activities.

Personnel Development Planning - tracks human resource management.

Reporting, Evaluation and Statistics - supports databases for report generating.

Time Management - uses company definitions of work time to evaluate data from the past as well as the future.

Travel Expense Accounting - supports business trip processing and reimbursement.

Manufacturing and Logistics - material requirements, master production scheduling, shop floor control, capacity requirements planning, product costing.

Sales & Distribution - sales order processing, shipping, billing, computer-aided sales, inventory management, invoice verification, warehouse management.

Manufacturing and Logistics

Manufacturing and Logistics supports an integrated information chain for the procurement of manufacturing and sales and distribution of goods and services.

Materials Management - covers tasks within material planning through purchasing to inventory and warehouse management.

Plant Maintenance - supports activities associated with planning and performing repairs.

Production Planning and Control - manages all phases of manufacturing.

Quality Management - plans and implements inspection and tests for quality with manufacturing.

Sales and Distribution - supports sales order processing from inquiry to processing to shipping and invoicing.

The R/3 System's open concept has quickly escalated its sales to over 2,400 client/server sites. The R/3 System has allowed the company to quickly expand its customer base from the R/2 mainframe focus to include such industries as Consumer Goods, Automotive, and High Technology. R/3's customer list has quickly expanded to include a wide variety of industries and names as listed in Appendix A.

Special Delivery Program

In mid 1994, SAP announced the Special Delivery program, which includes hardware, software and support services, for $500,000. The Special Delivery was a complete R/3 system which included: financial, cost accounting and human resources software modules; HP 9000 hardware and Informix relational database systems configured with Microsoft Tools and Novell networking for up to 32 users; and training from Delotte & Touche and ICS. In the future it was to have been ported to RS/6000, NT and UNIX platforms. This program was aimed at mid-size organizations in the health care, banking and insurance segments who earn revenues of $50M to $200M. As of May 1995, the special delivery program was scaled back due to lack of customer interest. Currently, it is being offered at the discretion of SAP Sales Offices; however, the Special Delivery Program is being phased out.

5.0 The Future of the R/3 System

R/3 System Version 3.0

SAP AG is attempting to turn the client/server architecture of the R/3 System into an open platform for 3rd party applications by introducing an open programming interface dubbed ALE (Application Link Enabling). ALE will enable SAP mainframe and client/server applications to communicate by sending messages to one another for tasks such as requesting data. The middleware handles the communications' different protocols and translations by defining how message applications behave and when and how synchronization takes place. The ALE middleware management occurs at the application level rather than the database level which widens the inter-operability of the R/3 System with third party applications and removes the constraints of having to rely on a single logical database.

SAP will present ALE for consideration to the Open Application Group a software consortium that establishes specification for application integration. ALE will provide the under pinning for SAP's distributed applications strategy, enabling users to run modules of SAP code at various sites. SAP's ALE development efforts are part of the OAG consortium's plan to coordinate the development of application-level interfaces. Customers will be relying on ALE as it will offer a higher degree of flexibility for the future. SAP's R/3 System version 3.0 has been in beta testing since early this summer and is scheduled for release this fall.

Increased Scalability

Heidleberg Project

By the end of the year, SAP will formally unveil the Heidleberg Project, which is the code name for a version of R/3 that is packaged as an easy to install and configure software application. The Heidleberg is SAP's attempt to address the growing concerns about the complexity of its R/3 software and the long and involved implementation cycle it requires. This modified version of the R/3 System is expected to run on Windows NT and SAP's Platform Partner hardware. With an estimated cost of $100,000 per module, the company intends to expand its target Fortune 1000 customer base to include companies with annual revenues of $50M-$200M.

Currently, SAP is determining the channel strategy that they want to use with the Heidleberg project. SAP is considering using a letter of understanding at the beginning of the sales cycle outlining what the potential client is entitled to. This agreement would define the length of the sales cycle, how many days of consulting or application analysis the customer is entitled to, as well as the total number of demonstrations SAP will perform. The company is considering rolling out the Heidleberg for its implementation partners; however, SAP is having difficulty developing a strategy that will provide the incentives without creating conflict for the larger Logo Partners who target the Fortune 1000.

While the Heidleberg Project has not been officially released, Workgroup Strategic Services has been informed that Digital Equipment Corporation sold the first Heidleberg installation to a company called Logistics in California. At this particular site, Digital Equipment Corporation provided the sales support and the Alpha hardware platform. Also, there are two more Heidleberg installations in progress.

6.0 SAP AG's Market Strategy

During 1994, Workgroup Strategic estimates that the client/server market was valued at US$6.2B and that this figure will grow up to 50% in 1995 (Figure 3). Also, we estimate that SAP captured 9% of the client/server market ahead of such companies as Lotus, Oracle, Microsoft, PeopleSoft and Computer Associates. Further, we expect the client/server market will grow to just under $US23 Billion at an average annual growth rate of 30% until 1999.

Source: Workgroup Strategic Services, Inc.

Workgroup Strategic expects that the strong expansion of the client/server market will continue to have a direct effect on SAP's annual revenue figures. The company is in an excellent position to continue achieving above average growth and maintain a significant portion of the client/server segment in the upcoming years due to the profitability of its platform partners like IBM, HP and Seimens Nixdorf and untapped market potential. The company is expanding both its global and vertical strategies to include new emerging markets like South America while emphasizing growth in established markets such as Japan. Also, the Heidelberg project will widen the company's target customer base into medium-sized companies, although this would admittedly involve higher sales and marketing costs. However, the success of the Heidelberg project is dependent upon product positioning and channel strategy.

Even assuming that the buoyancy of new business wanes, long-term growth is assured thanks to the increasing number of functions to be incorporated in the R/3 system and its new pricing concept, which is no longer based on the size of programs installed, but on the number of users per customer. Workgroup Strategic Services expects that SAP's strategy will increase SAP AG's worldwide customer sites from an estimated 4500 sites in 1995 to over 8600 sites by 1999 while maintaining an average annual growth rate of 17%.

SAP Growth through Globalization

Europe

In order to capitalize on the client/server market's double digit growth SAP AG has been putting a strategic focus on growing the company on a global basis. In Europe, SAP AG is the market leader with its R/2 mainframe software with about 2,000 users. The company is Europe's largest supplier of standard application software systems for mainframe computers. The R/3 System sales have been slow in the European markets. The strong divergence in the regional trend are attributable to two factors. The European economy suffered strongly from the recent recession, so capital spending by European customers has been very low. On the other hand, given its structure (R/3 client-server basis compared with R/2's mainframe orientation), R/3 is targeted to new customers. Europe still has a very high density of R/2 installations from the past few years. In the near term, this will limit the number of potential new customers for R/3 in the domestic market and will result in a concentration of distribution activities on foreign markets. The penetration level by SAP AG of some regional markets is very low; however, markets such as the United Kingdom, France and Italy have enormous potential for SAP's products. Currently, sales in these countries are still at a level of $US18M and below.

Germany

Germany remains the company's largest installed base. Also, in Germany alone, SAP AG is the largest supplier of standard application software systems for mainframe computers with a market share of over 80%. However, there still remain substantial growth opportunities; for example, SAP customers include only 4,000 of a total of 30,000 subsidiaries of major German concerns. However, the R/3 System sales have been slow for many of the same reasons listed above for the European markets.

SAP America

After Germany, SAP America represents SAP's AG's largest international subsidiary with corporate headquarters in Philadelphia, a Technology Development Center in Foster City, Calif. and sales and support offices throughout North America. During 1994, SAP America sales for the first time outsold SAP Germany. The phenomenal growth in the US is expected to continue through the rest of the century.

Only recently has SAP AG's American subsidiary been profitable (Figure 5). SAP AG initially set up a US based office in 1988 and, for the first few years after its inception, the revenue results were disappointing. SAP America's recent high revenue and huge acceptance has been due to a combination of factors. In 1992, SAP America came under management by Klaus Besier, who drove the subsidiary through increased advertising budgets and partnerships. R/3's platform partners, as well as customers, include vendors such as IBM, Apple, Intel, Hewlett Packard, Compaq and Digital Equipment who have been instrumental in the market penetration and acceptance of R/3. Also, Beiser was able to offset US advertising and distribution costs with high platform costs. R/3 software typically sells for 50% more in the US than in Germany.

Source: SAP America, Inc. and Workgroup Strategic Services, Inc.

Besier helped to drive the business, making it more profitable than its foreign counterparts, while claiming 40 of the 50 largest US companies in the chemical-pharmaceutical industry as clients. The United States is still a maturing market in regards to client/server and there are plenty of opportunities to sell R/3 systems. In 1994, 120 of SAP's 200 US customers purchased the R/3 system. Also, SAP America sales grew from an estimated 13% in 1991 to 33% of overall SAP AG revenue in 1994. As SAP AG continues to focus on the Americas with the R/3 Systems and future R/3 upgrades we expect this figure to quickly increase to just over 38%.

SAP AG in Asia

After the US, Asia is expected to be the next major growth area for R/3, particularly Japan. During 1993, Japanese R/3 sales brought revenue of an estimated $US5.6M. In 1994, which was the first full year for SAP in Japan, sales were $US30.6M greater than the $US18M originally targeted. In 1995, SAP AG expects this figure to double. Japan offers SAP AG huge growth potential and good customer prospects for the R/3 System for a number of reasons. First, SAP publishes its software in the Japanese Kanji characters. Second, the need is great, since the Japanese industry does not yet have standard enterprise MIS software. At present most of SAP's Japanese sales are generated by software modules for financial applications. For better market penetration SAP has divided up the Japanese market into three segments: A, B, and C.

Segment A - 500 international companies operating in Japan, which as a rule are subsidiaries of either European or American multinationals.

Segment B - Japanese companies with 1000 or more employees and annual sales of over DM500m.

Segment C - middle-market companies.

SAP goals for these three segments for the year 2000 are: Segment A: market share of 50%, Segment B: market share of 15%. Segment C will be penetrated later. We believe that SAP will be able to reach these goals because of its product and market penetration strategy.

Figure 6

Source: SAP America, Inc. and Workgroup Strategic Services, Inc.

Expansion beyond Japan into other parts of Asia is already a foregone conclusion. SAP is already preparing for its entrance into the Chinese market with product presentations. China is not expected to generate meaningful sales in the short term. SAP AG already derives revenue from other areas of the world including Africa; however, the revenue is very small in relation to the company's annual revenue. The company is also penetrating new regional markets including South America and targeting new customer groups (including service companies and smaller firms).

Table 4

SAP AG Subsidiaries

6 in Germany

2 in Austria

1 in Australia

1 affiliate in Germany

2 in France

1 in Belgium

 

2 in Switzerland

1 in Canada

 

2 in USA

1 in Denmark

 

 

1 in Italy

 

 

1 in Japan

 

 

1 in Malaysia

 

 

1 in the Netherlands

 

 

1 in Singapore

 

 

1 in South Africa

 

 

1 in Spain

 

 

1 in Sweden

 

 

1 in UK

Branch offices in Hong Kong, Malaysia, Japan and Korea.

Source: SAP America, Inc.

Revenue

During 1994, SAP AG Revenue reached $US 1.1 Billion dollars. Workgroup Strategic expects this figure to increase significantly in the wake of the future of the R/3 products and its global positioning (Figure 6). Until the end of the century, we expect R/2 mainframe sales to decline; however, R/3 System sales will more than make up for this decrease in activity with a growth rate of 30% until the end of the century. Also, a large number of newly-acquired R/3 customers, which has a multiplier effect vis-a-vis new installations and consultancy needs, will provide the main boost to business.

Figure 7

Source: SAP America, Inc. and Workgroup Strategic Services, Inc.

SAP AG will remain strong because of its earning strength. The revenue per employee ratios are extremely high, see Figure 7, and if the company is able to maintain these ratios it will keep them in a financially sound position. In 1993, product sales accounted for 62% of total sales, but increased to more than 71% in 1994. The higher this percentage is, the stronger the return. In the case of SAP AG this percentage is relatively high since the majority of the development costs of the products currently being sold have all been absorbed in previous years.

Source: SAP America, Inc. and Workgroup Strategic Services, Inc.

Also, markets in which SAP is already very successful promise further growth since the clients already under contract generate new sales in the form of additional installations, consultant services and training, as demonstrated in Figure 8. SAP is preparing for this prolific growth by adding another 200 customer service and support staff and setting up nine customer training centers in the US. With its very strong market position, SAP should be able to achieve above-average growth in a very fast-growing market.

Workgroup Strategic estimates that R/2 sales will decline by an average of some 10% per year while consulting and training revenues rise by some 30% per year on average. According to these assumptions, the proportion of product sales out of total sales will reach roughly 71% in 1995 and will come down to 68% in 1996. As a result, SAP is in a position to offer a high quality consultancy and training service despite the growing number of customers. Three main factors could potentially interfere with our anticipated growth rates.

  1. Major technological change in mainstream computers.
  2. Competition: new entrants could force prices down.
  3. Antitrust and International legal issues.

SAP AG's growth opportunity will come from its largest subsidiary, SAP America. As discussed earlier, SAP America sales grew from 13% of SAP AG's total revenue in 1991 to 33% in 1994. Workgroup Strategic Services expects this growth to continue in 1995 with SAP America contributing at least 38% to overall revenues. SAP America is investing heavily in the infrastructure that will support R/3 sales and support for the United States. Under the leadership of Klaus Besier, SAP America has developed relationships with hardware, database, and consulting/integrator partners to support its direct sales effort. Additionally, SAP America has Competency Centers, the Partners Academy, and Industry Centers of Expertise located across the United States, all meant to support and nurture consultants and partners who support R/3.

The remainder of this profile will focus on SAP America, its competitive stance and future outlook.

7.0 Marketing and Sales Programs

Advertising

During 1994, SAP America used the Ciociola & Co in New York for its advertising campaign and spent an estimated $3.5 million for targeted print advertisement that focused mainly on trade journals. The predominant message of this campaign was integration - R/3 integrates the client's information entry, processing and storage across the enterprise. In 1995, SAP America will more than double its 1994 ad spending, with an $8 to $10 million advertising budget. SAP America is also seeking a new agency. Workgroup Strategic believes the Ciociola group was no longer a good fit given that SAP is seeking to change the direction of its advertising campaign.

SAP America has enlisted the help of its public relations firm, The Webber Group, to facilitate the process of researching a new ad agency. The Webber Group has narrowed the choices down to a few players and has selected one agency to perform a "test run". SAP America is being secretive about the agency choices because the company wants the new campaign to hit the industry with a "big bang". However, the company has indicated that one of their marketing goals is to change the perception of R/3 as being inherently complex and proprietary.

SAPPHIRE 95

SAPPHIRE is SAP America's annual R/3 and R/2 end-user conference, although it focuses primarily on R/3. Also, the event is designed to appeal to potential customers since SAPPHIRE gives prospects the opportunity to talk with R/3 customers and find out how they use R/3. The 1994 SAPPHIRE conference attracted 4,000 people.

SAPPHIRE 1995 was held in Phoenix, Arizona between September 17 and 20. It was booked to capacity with over 5,000 registrations. SAPPHIRE 95 includes an exhibit which is intended to inform attendees about the wide range of R/3 3rd party solutions that can be implemented to expand R/3's capabilities. Also, SAP America's major platform partners participate in the exhibit by producing seminars. Seminars include a broad range of topics, such as SAP's future technology direction, R/3 case and customer studies, calculating R/3's return on investment, and learning more about specific R/3 applications, workflow and other topics. SAP America normally avoids releasing important announcements prior to the event and discusses its plans during SAPPHIRE. This year SAP America is expected to discuss its plans to target the middle market and its strategy concerning ALE, open information warehouse, business modeling and workflow.

SAP Sales Strategy

SAP's Partnering Relationships

R/2 and R/3 software is sold directly from SAP. The company does not provide any installation or implementation services to the client and they remain neutral regarding hardware and implementation choices. SAP does have a very robust partnership program to provide its customers with a myriad choices from the system hardware, database architecture, and consulting and/or implementation providers. To clarify the relationship between the partners and SAP, the company has developed a tiered structure for its implementation partners, as well as specifically defined relationships for hardware platform vendors and technology partners.

SAP's Partner Programs use a Best of Breed approach, providing customers with a choice of diverse business expertise. The three tenants of SAP's strategy are as follows:

According to SAP, the following criteria are factors in picking a partner

In developing alliances, SAP lets the partner provide the services, training, and follow on support. SAP requires a formal partnership agreement that outlines expectations for both parties.

SAP's Partner business plans includes goals for:

All agreements with logo or implementation partners are for one year with an option to renew at the discretion of SAP. Each partner is aligned with a SAP Partner Manager that evaluates customer satisfaction, performance against the business plan, and operating perception (i.e., is the partner easy to work with). The Partner's business plan and partnership agreement call for continued communication and training of employees. The SAP Partner Managers use the above criteria and customer satisfaction surveys in order to make a decision on the renewal of the partnership agreement.

SAP uses an annual AWARD of EXCELLENCE for partners that meet its annual criteria. Most of the cooperative efforts between SAP and partners happen at the local level, with the SAP and partners staff working together at the customer site to provide a solution.

Partner Programs

Platform Partner - Hardware vendors whose platforms are certified by SAP and do not provide value add services. SAP takes a long term approach in choosing hardware platform partners. Partners must certify their systems and establish a Competency Center in Walldorf, Germany. The vendor must staff the Competency Center with engineers that are certified and will maintain the vendor's hardware certification. Some Platform Partners are also logo partners and provide consulting or installation services.

Technology Partner - Database application vendors that work with SAP to insure compatibility and optimization of underlying database architectures.

Logo Partner - Large scale integrators that provide consulting and re-engineering services. SAP has over 13 logo partners that offer full service consulting and will act as a project manager in bringing in other partners where their expertise is needed.

Implementation Partners - Large integrators that perform system installation and some consulting services, usually within a vertical market or technology area. Implementation partners must have a national presence for service, as well as a commitment to training and support. National implementation partners have a smaller portfolio of services than the logo partners as they usually do not provide re-engineering services.

Regional Implementation Partners - Integrators with a smaller service portfolio, usually integrators with a very specific vertical market or technology niche. Regional implementation partners have a smaller set of skills and geographic coverage. Typically, they offer vertical market or a specific technology expertise.

Please refer to Appendices B through D for a list of SAP partners.

Training Resources for Partners

In June 1994, SAP introduced the Partner Academy as a response to the shortage of available SAP consultants. SAP's Partner Academy provides application consultant certification by training in the core functional areas of the R/3 System.

The Partner Academy is able to consolidate training to 5 weeks by using accelerated learning techniques and expecting consultants to have a core knowledge of their functional area. The first four weeks of the Academy is dedicated to hands on training and learning how SAP is equipped to handle customer needs. The last week is devoted to the final test for certification. All consultants are grouped into cross functional teams and are assigned a case study. The team must work together in order to build a model company based on R/3. Final certification is based on tests during the training period and on the success of the model company. Certification is issued to the company and individual for a particular release of R/3. To maintain quality assurance, SAP provides Delta Training to re-certify consultants for new versions of the R/3 System.

Competency centers provide end user training and are staffed with pre-sales support personnel from SAP. The Competency Centers are where the customer's hardware, networking and application development needs are determined.

Industry Centers of Expertise

SAP provides its consulting partners, technical support staff, and customers with a central resource and clearinghouse for the development of customized technology solutions for vertical markets through its Industry Centers of Expertise (ICOEs). SAP maintains several centers including; the High Technology and Electronics ICOE located in Foster City, California; the Oil and Gas ICOE in Houston, Texas and Ontario, Canada; the Utilities ICOE in Toronto, Canada; and the Automotive ICOE in Chicago. The centers are designed to work with representatives from each vertical segment in order to widen the appeal of the R/3 System to the vertical segment. Together representatives and SAP consultants determine and incorporate features needed by each vertical market. The goal of the ICOE is to combine targeted software solutions and industry-specific consulting services to shorten the implementation cycle and to tailor the R/3 environment more closely to the needs of vertical market customers.

International Sales

SAP uses its Global Account Executives to sell to multinational customers. To help sell internationally, SAP uses native country managers in each region. SAP partners selling internationally must have 2 logo partnership agreements per region in place to give customers a choice of solution providers. SAP distributes software directly in all countries. There are no incentives to refer business to partners or to keep an account in-house.

SAP's Sales and Implementation Cycle

The initial contact from a potential customer may be from SAP's direct sales force, or a referral from a partner. The sales cycle can range from six to eighteen months depending on the complexity of the IT environment and the proposed re-engineering effort. SAP's Account Executives will evaluate the customer's needs and will work with a SAP Product Engineer to develop an on-site customized demonstration. The Account Executive will give the client a list of Platform Partners, Logo Partners, and/or Implementation Partners for re-engineering, system configuration, and the installation of the hardware and network.

SAP's Basis Engineers use the Account Executives and Product Engineers information to determine configuration and system size for a demonstration version of the R/3 software. Basis Consultants are certified by SAP through a 16 week training course that focuses on the isolation layer of the software, the basis layer that keeps the application separate from the database architecture. Basis consultant activities at the customer site are billable hours in addition to the software cost.

Once the customer environment is ready for the software installation, a Basis Engineer will load R/3 onto the customer site. Typically, this is a 2-4 day effort for the initial installation of the software onto a network. Basis consultants will go back into a customer site to fine tune the demo once all of the pieces are installed.

The full implementation of SAP's R/3 software can take up to two years depending on the complexity of the environment. The majority of the time is spent re-engineering the information flows within the company before the system and software are installed. Outside consultants usually perform the re-engineering consulting activities, the cost of such consultants can range from 2 to 15 times the cost of the R/3 software. According to Digital Equipment Corp., hardware costs equal the R/3 software, while consulting activities will run about three times the cost of the R/3 modules. Annual SAP support is 15% of the software price, with the first six months of support free.

The growing interest in the R/3 System combined with the increasing reliance on outside consulting is creating a bidding war for SAP consultants. SAP consultants earn between $80 - $120,000 annually. Virtually all of SAP's Logo and Implementation Partners are actively recruiting SAP consultants which is helping to drive shortages, thereby increasing consultant fees and salaries. SAP hopes that by actively recruiting and training SAP personnel they will be able to train an additional 5,000 consultants worldwide in 1995, this is in addition to the 2,200 trained in 1994.

8.0 SAP Customers

User Concerns of SAP Technology

In Workgroup Strategic Services' conversations with SAP AG customers, the majority of the customer base that we spoke with are satisfied with their experience with SAP and the R/3 and R/2 products. However, some companies identified the following drawbacks, including:

  1. SAP is not a true value for the money.
  1. SAP applications are biased toward core financial accounting and logistics modules.
  1. R/3 is mainframe technology and SAP AG will abandon them as they move forward to focus on new technology and directions.
  1. R/3 has a centralized mainframe approach which prevents users from easily distributing the application modules to multiple platforms.
  1. The software is difficult to implement because of the wide range of processes and functions.
  1. Local SAP hot lines have not met customer expectations.
  1. Consulting companies are cornering the market on SAP expertise. They are getting rich on implementation projects and are passing increased costs on to the customer.

Further, users fear that the software is weak and difficult to implement because of the wide range of processes and functions; ironically enough, this is why many users purchase R/3 in the first place. In our conversations with satisfied SAP customers; they felt that customers that are unhappy with the implementation process more than likely did not control the consultants and the implementation process. The advice of successful users to potential SAP users is to implement the R/3 system with a re-engineering focus while training internal employees to work closely with and control the external consultants for the most successful implementation.

User Case Study

For a very large multi-national consumer goods company, the worldwide SAP R/3 implementation took 40 weeks from the initial implementation to a fully integrated environment. The company used Anderson Consulting, IBM and SAP for the project implementation. IBM's PowerPC parallel processing systems were used as the server platform with Anderson Consulting providing most of the re-engineering support. The company maintained project management responsibility as the company felt it had to control the re-engineering and implementation process very carefully. According to the project leader, this lack of control can create scope creep, the ad hoc addition of features as the project progresses. According to an IBM/SAP Consultant, scope creep is the primary cause of implementation delays. Seven weeks were spent mapping the processes at the company's eight manufacturing plants. Two months were spent training company employees and another 13 weeks for the prototyping for all plants. Final plant testing took another 12 weeks to accomplish. During the implementation, up to a third of the personnel working on the implementation were outside consultants; for the most part, about one quarter of the task force were from outside the company.

Lessons Learned

This company felt it relied on too many decision makers in the overall planning and implementation of R/3. It felt it controlled the outside consultants and implementation partners carefully but had too many internal personnel managing the project. Many of the delays were from internal politics and slow decision making. The company rolled the R/3 implementation out in stages with an 'as is' process backup to ensure information integrity. The company went live with its R/3 implementation in June 1995, it reports that it is very happy with the R/3 environment.

9.0 Relationships

Outside Consultants

SAP's approved outside consultants are referred to as Logo Partners. They include:

Anderson Consulting IBM Consulting Group

Cap Gemini America ICS Deloitte

Coopers & Lybrand KPMG Peat Marwick

CSC Consulting Origin Technology

Dynamic Data Solutions Price Waterhouse

Ernest & Young

One of the functions of SAP's Logo partner program is to set quality control standards for outside consultants. The consultants are required to attend 5 weeks of SAP R/3 training, called SAP's Partner Academy. A testing process is required for certification. SAP does not provide the outside consultants with any business re-engineering process (BPR) training. That is the consulting firm's responsibility.

The Logo partners are responsible for helping the client to integrate all of the different aspects of an R/3 installation. They play a key role in facilitating the client's BPR process. Logo Partners also play a major role in driving R/3 sales. However, they do not receive any incentive (commissions, royalties, etc.) from SAP America.

Digital Equipment Corporation

Virtually all of Digital's groups are involved in the sales, service and support of SAP software. The Account Business Unit (ABU), System Business Unit (SBU) and Sales Support teams all pitch the sale to a potential client. Digital's ABU team is chartered with selling directly to Digital's largest 1000 accounts. Once an ABU determines that an account is examining SAP software, Digital will then pitch its hardware and services. In about 25% of the cases, Digital is able to pitch its sale early in the evaluation stage. According to Digital, for every lead its receives from SAP, Digital generates about 20 leads on its own for SAP sales. Usually Digital is called in after the initial planning and BPRE concept are finished.

Digital's System Business unit has a SAP-only field team that acts as a 'swat team' in determining sales, support and the need for technology consultants. This team is staffed at the local level to provide SAP support. During the sales cycle, Digital's System Integration Group performs the technical installation while SAP's Basis consultants customize the R/3 application.

Overall, Digital is happy to co-exist with partners who provide application consulting and other re-engineering services. The company's technical services do not directly compete with the BPRE capabilities of SAP's Big 6 logo partners and often times a SAP's Implementation Partner will call Digital for help in putting together a proposal. All of Digital's hardware delivery is through its distributors, particularly Pioneer, Advent and Wiley.

Digital enters a potential client site marketing its Alpha's 64-bit processing architecture and large memory capacity as the wave of the future while promoting its Alpha workstations and servers as being ideally suited for transaction oriented solutions. Digital's Pentium-based systems are SAP certified; however, the primary focus is on its Alpha/Windows NT/SAP solution. Digital stresses that its Windows NT solution is available now which allows users to migrate to databases such as Oracle as they become available.

Digital considers Hewlett-Packard to be its biggest threat when competing for SAP-based sales. Hewlett-Packard typically will bid about 30% higher than Digital; however, they will then discount its bid to meet the Digital proposal. Also, competing hardware vendors, primarily HP, spread misinformation about Digital and its relationship with SAP. According to a high level Digital Account Manager, "Hewlett Packard is the used car dealer of the SAP environment." Digital is disappointed that SAP does not police this type of mud slinging and takes a hands off approach to each Platform Partner's sales activities. However, Digital believes that if SAP promoted the neutrality of the R/3 System this would help create a more honest sales atmosphere.

IBM Computer Corporation

IBM is one of SAP's largest customers with an R/3 worldwide rollout currently underway. Once completed, virtually all of IBM will be running R/3. IBM is the only company that is an SAP Platform Partner, Logo Partner, and Technology Partner. IBM uses a company wide strategy in selling SAP solutions.

IBM's marketing message is global in nature - IBM can coordinate and manage a worldwide R/3 rollout for the customer. IBM attempts to leverage its global presence, using sales organizations in each country to drive sales and manage the implementation and support.

IBM positions SAP as part of IBM's overall program and a piece of the full services that IBM offers. IBM's tag line is "IBM + Hardware + SAP R/3 = Seamless Customer Support." IBM's marketing message promotes the depth and breadth of its services including:

IBM's industry groups, its Integrated Systems Solutions Corporation (ISSC), and system integrator partners all come together to sell, implement, and support R/3. IBM targets its installed base to generate SAP sales. Once IBM sees a need for re-engineering, it brings in outside partners such as Anderson or its ISSC subsidiary.

IBM's ISSC group bids for the facilities management portion of any R/3 installation. ISSC will also bid for help desk service for an R/3 project. IT consulting, as well as data processing consulting, is also part of the ISSC group.

IBM's consulting group cuts across vertical industries, hardware platforms and operating systems to provide independent high level consulting for the customer. SAP is not always the choice for IBM's consulting group clients. IBM has a staff of 75 in its competency centers, they are considered technical giants for SAP. They use R/3 and determine configuration and actual implementation, with an eye toward needed re-engineering. IBM has 200 SAP application consultants in the US that drive outbound sales. This group works for the IBM/SAP consulting center. This group is growing significantly, the average experience level is twelve years with SAP software, mostly R/2. IBM also has specialists in each vertical market area. The Project leader will determine the design, processes involved, and deficiencies in the current MIS environment. The IBM consultant will then map out the use and implementation of R/3 for the customer.

IBM's SAP Consulting Group is usually called in after SAP makes a sale for R/3. IBM's consulting group will train the client's project team and end users as they implement SAP's R/3. Upgrades to R/3 are handled by SAP directly. In training the end users, IBM and SAP seek to empower the user to both learn the system and to diagnose and correct any problems. IBM's Consulting Group acts as the Project Manager in outlining the scope and parameters of the project. The biggest challenge for IBM's consulting group as they manage a client project is to show some sort of deliverable every month to six weeks. Most projects will take under a year to implement, more complex projects will take 18 months to two years to complete. One of the biggest problems is scope creep and managing the customer's expectations.

IBM trains its consultants through SAP's Partner Academy. In addition, IBM has three sites in the U.S. with 75 people staffing technical support. These are all certified Basis Consultants, certified by SAP through a 16 week training course. Basis Consultants are trained in the implementation and configuration of the system. These consultants are trained at the isolation layer of the software, the basis layer keeps the application separate from the database architecture. Basis consultants are billable, they install systems and then will go back and tune the systems. This is usually a 2-4 day effort to install the software onto a network. IBM has 1000 experienced SAP consultants in the US, 900 in Europe.

IBM's Application Consulting Group is hardware independent and can recommend any system. Its application development is separate from hardware requirements. Technical consultants are trained on IBM systems, and the basis consultants work on mixed environments; for the most part, they are hardware independent. IBM is also judged on customer satisfaction measures, with all staff measured through customer satisfaction surveys.

IBM has 30 competency centers worldwide that are used to test and optimize R/3 configurations. IBM has an IBM/SAP international competency center in Walldorf, Germany, that is used to develop, benchmark, and troubleshoot technical installation needs. This center is also a conduit to SAP for technical guidance.

IBM operates competency centers in Europe; Singapore; Atlanta, Georgia; Endicott, New York; and San Jose, California. IBM performs its benchmarking and configuration assistance at the competency center in Walldorf Germany. IBM also uses its Open Systems Centers in Dallas, Texas, and Hong Kong to simulate a given environment and software/hardware configuration.

IBM - SAP Cooperative Support Agreements

IBM provides worldwide service support for its SAP-based customers. Usually, SAP becomes part of the overall contract and provides the help desk support. In this case, SAP is the first point of contact and is responsible for problem resolution and will then dispatch a service technician.

IBM and SAP AG have agreed to provide worldwide cooperative support to SAP customers. The agreement provides for 24 hour service and support for companies integrating SAP's R/3 applications on IBM RS/6000 systems. According to the agreement, once a customer calls IBM or SAP for customer support or a service request about its R/3 environment, the request will be shared via an interface that notifies the appropriate customer service division, regardless of the country where the user is located.

IBM's Services 2000 program is a 24 hour on site service agreement for SAP installed sites. This includes normal software support via a standard software maintenance agreement from IBM's AIX Software Maintenance Group. Services include Early Watch, a fee-based service that proactively monitors and diagnoses potential failures in the customer's system. IBM Field Engineers, with SAP Basis Consultants, check for performance and capacity utilization.

Anderson Consulting

Anderson Consulting is one of SAP's largest Logo Partners. During the sales cycle, Anderson is usually the first into a potential SAP account. SAP will not go into an account in a joint sales call with a Logo Partner such as Anderson; the customer must call Anderson for it to become involved. During the sales cycle, Anderson looks for buy-in for the project at the top levels of management. Anderson feels the proposed changes should be a shared vision, both Anderson's and the client's.

Anderson's goal is to identify two types of re-engineering opportunities:

Anderson feels different skills are needed for the full re-engineering effort. It will provide business analysis to evaluate information flows and business processes. Other specialists, technology, application and others, will also be used to determine the final environment for the customer.

Anderson Consulting provides the initial planning for the project scope, goals, and milestones for completion. Working with the customer, Anderson will act as Project Manager in recommending other implementation partners or consulting firms to help with the re-engineering and implementation of R/3. Anderson will do the upfront work required for clients re-engineering their businesses. Anderson will perform the initial consulting and advise the client on recommended configurations. Anderson helps the client determine which partners to use for consulting, implementation and the underlying hardware and database platform. According to Anderson, customers use the following decision factors in picking partners:

Anderson looks for the following in the consultants it uses for a SAP implementation project:

Anderson has its own SAP Data Center to prototype, design, and configure proposed client environments. The configuration testing and tuning is performed at Anderson's Data Center.

Anderson has a staff of 160 in its Northeast competency group. It is training 60 people a month nationally to support R/3. Anderson would like to have 1500 staff trained by the end of 1996.

Microsoft

In March of 1993, Microsoft announced its plans to provide compatibility between SQL Server, its BackOffice enterprise-level database management system, and R/3. As of August 1994, SAP reported 40 Windows NT-R/3 customers worldwide. On September 7, 1995, SAP and Microsoft announced commercial availability of R/3 for Microsoft SQL Server 6.0. Microsoft and SAP had been working on this integration for approximately 2 years. SQL Server 6.0 has been developed to meet the SAP R/3 technical specifications, while R/3 Version 2.2E supports Microsoft SQL Server. Since March, 1995, the R/3-SQL Server 6.0 combination has been pilot tested in 11 Windows NT-based SAP sites. Hardware platforms that support the R/3-Windows NT combination include: AT & T, Data General, Hewlett-Packard, IBM, Sequent, Siemens, Nixdorf and Zenith.

There are strong ties between Microsoft and SAP America at the executive level and also between companies' engineers. Microsoft's Business Systems Division, which is the group in charge of growing Microsoft's presence in the corporate segment, plays a key role in the relationship between SAP America and Microsoft. The two companies are strongly committed to strengthening compatibility of the R/3 - Windows platform. Of all the BackOffice applications, Microsoft is providing links from SQL Server (in run-time) to R/3 first because SQL Server is designed as an enterprise-level database. SQL Server's-R/3 compatibility will help Microsoft target large corporate clients and increase their credibility in the corporate segment. The Microsoft SQL Server deal enables SAP to provide their customers with an alternative to Oracle DBMS. R/3 was originally built to use Oracle DBMS, in fact SAP is Oracle's largest database reseller. However, Oracle (especially their Financials program) is one of SAP's main competitors. It should be noted that Microsoft is also negotiating similar deals with SAP's competitors, PeopleSoft and Dun & Bradstreet, to integrate SQL Server with their client/server applications.

Regarding the actual installment of the R/3-Windows platform, Microsoft has no involvement in the business re-engineering process. That task is up to the logo partner and the client. There is no competition between Microsoft and the logo partners because their roles do not overlap.

In Redmond, Microsoft has an Executive Briefing Center, which is basically a Microsoft BackOffice sales site for enterprise-level clients. The R/3-Windows platform is set up at the Executive Briefing Center, where high level corporate clients are able to see first hand how the platform actually functions. Currently there are no SAP personnel at this site, but SAP plans to have a presence at this office in the future.

In June 1994, Microsoft announced that it will use R/3 general ledger, procurement and asset management applications to support its financial operations.

SAP America and Microsoft are exploring ways of using Object Linking and Embedding (OLE) technology to enable desktop users to access R/3 from Microsoft Word or Excel.

Figure 9

Client/Server Application Software Revenue

By Vendor

Worldwide

1993 - 1994

Source: Workgroup Strategic Services Inc.

10.0 SAP Competitive Overview

Competitive Overview

SAP's three major competitors in the client-server application market are Oracle Corp., Dun & Bradstreet Software and PeopleSoft. SAP caught its competitors by surprise with the release of R/3 in 1992. R/3's full suite of applications based on a three-tiered architecture is a more comprehensive solution than similar offers from competitors. In 1993, the top client/server financial vendors were Oracle Corporation with $81 million in sales, SAP America with $71 million in sales, and Dun & Bradstreet with $32 million in sales. In 1994, SAP America's sales moved it ahead of Oracle, with Dun & Bradstreet remaining in third place. In 1994, Oracle had $239 million in all application sales, compared with SAP America's sales of $367 million for the same period.

Table 5

Competitive Matrix

SAP AG

R/3 and R/2

ORACLE

Cooperative Applications

D & B

SMARTStream

PEOPLESOFT

C/S Applications

BAAN

TRITON

FY94 Revenue*

$1.186 B SAP AG

Worldwide

($367 M SAP America Only, Up 150% from 1993)

$2 B

Worldwide

(Includes Oracle7 database revenue which has approximately 50% of the database market. Revenue from Services was $837 M, with $1.2 B in Licenses and other revenue. Domestic revenue was 40% of worldwide revenue)

$406 M**

For All D&B Software Services Worldwide

**Operating Revenue

($4.896B Operating Revenue for all D & B Divisions, up 3.9% from 1993)

$113 M

Worldwide

$122.9 M

Worldwide

94 Rev. Growth

+66%

+33%

-14.7%

+94%

+93.8%

Product Suite

Financials, Sales and Distribution, Manufacturing, Human Resources, Project Management, Materials Management

Financial Management, Manufacturing and Distribution (Project Management, MRP) Human Resources

(Sales Application release planned for September, 1995)

SMARTStream:

Financials, Human Resources, Manufacturing and Distribution, Decision Support (Reporting & Analysis)

Human Resources Management, Financials, Distribution

(Manufacturing tentatively planned for release sometime in 1996)

Manufacturing, Financial, Distribution, Services, Transportation and Project (the last two are not currently available in the U.S.)

Hardware Platform

Intel, IBM PowerPC-based RS/6000, HP 3000 Series, Sun SPARC, DEC Alpha, DG AViiON and others

Intel, IBM PowerPC-based RS/6000, AS/400, HP 3000 Series, Sun SPARC, DEC Alpha, DEC Vax, DG AViiON and others

Not IBM MVS

IBM PowerPC-based RS/6000, DG AViiON Series, HP 9000 or HP T5000, Sun SPARC, DEC Alpha, Intel

DEC Alpha, DEC VAX, DG AViiON, HP 9000/8xx, IBM PowerPC-based RS/6000, Intel, NCR, 3000, Pyramid MI Server, Sun SPARC, Unisys 6000/65, Unisys 6000/75 & 85

HP 9000 Series, IBM PowerPC-based RS/6000, DEC Alpha, Sun SPARC, DG 88000, Intel, and others

Server OS

IBM AIX, HP UX, Sun Solaris, Digital Ultrix, Bull BOS, DG-UX, DEC Open VMS, DEC OSF/I, Windows NT

IBM AIX, HP UX, Sun Solaris, Digital Alpha AXP, DEC Open VMS, Windows NT and others

IBM AIX, DG-UX, HP-UX, Sun Solaris, DEC OSF/1, Windows NT

DEC OSF/1, DEC Open VMS, DG-UX, HP-UX, IBM AIX, Windows NT, SCO UNIX, Unixware, Data Center/Osx, Dynix, Sun Solaris

HP-UX, IBM AIX, DEC Ultrix, SEQUENT UNIX OS, SUN Solaris, DG-UX and others

Client OS

Windows NT, OS/2, Windows, Unix with Motif, Macintosh OS

Windows 3.1, Windows 95, Windows NT, OS/2

Windows 3.1, Windows NT, MS-DOS

Windows NT, Windows 3.1

(OS/2 Support is Conditional)

Windows NT, Unix-based Motif, Windows 3.1

Database Architecture

Oracle, Informix, Software AG's Adabas, Microsoft SQL Server, Sybase DMS

Oracle

Sybase for Sun Solaris, Sybase SQL Server for NT, Microsoft SQL Server

DEC's Rdb, HP's Allbase, INFORMIX, Gupta, SQLBase, Sybase, Microsoft SQL Server, Allbase/SWL, Oracle 7, Oracle Rdb, IBM DB2

Oracle, Informix, C-ISAM, Tribase (Baan's database)

94 Install Base

R/3-2400 | R/2-1950

1,000+

400 (to date)

630

1800

Source: Workgroup Strategic Services, Inc.

*Revenue defined for the purpose of this table -- Revenues listed are worldwide and include all the company's revenue sources, not just client-server application revenue. Revenue figures include each company's product revenues from all products, license revenues from all software products, revenue from support, consulting and education services.

**Operating Revenue

Oracle

Overview

Oracle is a large organization that offers a variety of different products from database applications to client/server solutions. Oracle 7 is its core product focus; however, the company is SAP's strongest competitor in the client/server segment. Oracle's new line of client-server applications, called Cooperative Application, started shipping this past summer and includes financial, manufacturing, distribution, human resources, project accounting and government financial modules. The updated version supports over 20 languages and currencies.

Pricing

Oracle's client/server pricing is primarily based on the module and number of users. For example, the Financial Application piece includes 16 modules at $12,500 a module or $200,000 for everything. Also, the one time per user licensing fee ranges from $2,000 to $4,000 depending on the robustness of the module. Another variable that effects the per-user price is the type of user (i.e., different levels of access). In general, the size of the corporation is not factored into the price, except in the human resource modules because the modules are effected by the number of employees tracked. Lastly, Oracle's module and end user fees do not include any costs associated with installation, implementation, support, training or maintenance. Overall, Oracle's client/server applications are less expensive than SAP's R/3 and more expensive than Dun and Bradstreet's.

Strengths

Weakness

Opportunities

Threats

PeopleSoft

PeopleSoft released the HRMS (Human Resources Management Software) in 1989, the Financial Software in 1992 and Distribution Software in 1995. As PeopleSoft has expanded its client/server offerings they have also been expanding their global focus by opening offices in Australia, Canada, France, Germany, Mexico, Netherlands, Singapore and the UK. PeopleSoft is a market leader in Human Resources Management Software.

Pricing

PeopleSoft is guarded about their prices; however, they indicate that costs are determined by the choice of modules. For example, the Financial Application contains 6 modules, so the price would be determined by the number of modules the client chooses. The most expensive of these is the General Ledger, which is priced between $100,000 to $400,000. The other modules range between $60,000 and $200,000. Other variables involved in determining price are: size of organization, number of users, licensing, and length of implementation. PeopleSoft's up front costs include training, implementation, installation and first-year maintenance. Also, PeopleSoft targets a wider range of business segments including the Fortune 200 to Fortune 1000.

Strengths

Weakness

Opportunities

Threats

Dun & Bradstreet

In the early 1990's, Dun & Bradstreet established a position as a leading supplier of mainframe financial packages. In 1991, the company began to expand into the client/server application market. Today, Dun & Bradstreet's accounting software ranks fourth in the client-server application market and at the end of 1994 has over 1,000 client/server sites worldwide, which is approximately half the number of SAP's client/server sites worldwide. Pricing

Dun & Bradstreet's client/server applications are priced by module. For example, SMARTStream Financials are made up of 10 modules (Ledger, Payables, Asset Management, etc.) Each module ranges between $50,000 to $60,000. For the entire Financials application, a Fortune 500 company can expect to pay at least $250,000 to $500,000. These prices are for the software only, they do not include additional expenses such as consulting, implementation or training costs.

Strengths

Weaknesses

Opportunities

Threats

Baan

Overview

Baan Company was founded in 1978 and operates out of dual headquarters in Ede, The Netherlands, and Menlo Park, CA. Baan provides client/server-based Enterprise Resource Planning (ERP) software and has direct sales channels in 19 countries. The U.S. is the only market where Baan has both direct and indirect sales channels. Generally, their business partners handle sales to clients with 100 or fewer users, while Baan's direct sales focuses on multi-site customers. Baan's two strongest consulting partners are KPMG and Ernst & Young. Implementation is almost always handled by a business partner. With the addition of major corporate accounts over the past couple of years, Baan has been emerging as a leading playing in client/server enterprise-level applications. However, unlike SAP, they focus more on the future potential of client/server architecture, with less emphasis on connecting to the mainframe.

Baan first released its suite of client/server applications, called Triton, in the late 1980's. Triton supports over 14 languages including a Japanese/Kanji version and offers many modules including manufacturing, financials, distribution, services (after-sales support), transportation (shipping, trucking, etc.) and project (building and related) modules. Currently the transportation and project applications are not available in the U.S.; however, Baan is considering combining Distribution and Transportation into one application for the U.S. market.

Figure 10

Source: BAAN and Workgroup Strategic Services, Inc.

Baan believes that Triton has greater scalability than R/3, and reports that it has Triton customers ranging from 4 users to customers with thousands of users. Also, Triton differs from R/3 by allowing companies greater flexibility in re-engineering its business processes. A company can install Triton to fit its current business processes, and later on, if the company wants to re-engineer its business processes, it can re-work the Triton application to fit the new processes. With R/3, many companies are put in the position of having to implement new software, re-engineer their business processes and continue to run the company at the same time. Triton offers companies more flexibility to accomplish these tasks on their own time table. Also, this allows companies to change their software functions in response to product cycles, changes in corporate structure, changes in the market and other factors.

Baan is only beginning to establish themselves in this country. They have run advertisements in trade journals, such as Computerworld; however, they have not embarked on a serious advertising effort in the U.S. to date. Also the training program for their U.S. business partners is still evolving.

While Baan is still a newcomer to the US market they have achieved phenomenal growth over the past year. Their US customer base includes companies like Snap-On Tools, Northern Telecom, and Boeing (with 17,000 users at over 70 sites), Mercedes-Benz Alabama manufacturing facility, and American Steel & WireCarrier Transicold. Globally, their customer base includes: Philips Medical Systems, Hitachi, and many manufacturing companies in Japan, Korea and The Netherlands.

Pricing

Baan's pricing structure is the simplest of the competitors reviewed. Pricing for the Triton is based on the number of concurrent users, with an 8-user foundation price at an estimated $80,000. For customers in the 100 to 200-user range, the per user fee is approximately $5,000. The more users, the lower the per user fee. For the entire suite of applications (manufacturing, financial distribution and services) a 100-user client could expect to pay about $700,000. The entire suite would cost about $1.7 million for a 500-user client, which works out to about $3,500 per user. Other services like implementation, training and maintenance are additional fees. Generally maintenance costs 15% of the total price.

Strengths

Weaknesses

Opportunities

Threats

Worldwide Installed Base

Client/Server Applications

by Vendor

Source: Workgroup Strategic Services, Inc.

11.0 Introduction to Workgroup Strategic Services' S.W.O.T. Analysis

Workgroup Strategic Services developed the following analysis based on SAP's Strengths, Weaknesses, Opportunities, and Threats (S.W.O.T.) in the marketplace. The S.W.O.T analysis is based on interviews with SAP executives, sales force, Platform, Logo and Implementation Partners in addition to executives within SAP's competition. Workgroup Strategic combined this information with background research as the foundation for our analysis of SAP's current and future position in the market.

Strengths - Weaknesses - Opportunities - Threats (S.W.O.T.) Analysis

SAP's Strengths

SAP relies exclusively on its partners to provide consulting and implementation services for the customer. SAP does not make any recommendations regarding the proposed hardware platform or which partner will implement the system. All partners compete amongst themselves for the contract; it is up to the customer to make the decision about who will consult and implement the project.

SAP's Logo and Implementation Partners are reviewed on an annual basis and have to meet very stringent guidelines for certification and their ability to support customers.

SAP provides certification programs and centers to ensure the vendor's hardware will support R/3 environments. SAP works very closely with hardware partners to optimize the supporting hardware.

SAP's R/3 application will run on a wide range of operating systems, database architectures, and types of processors. All of the underlying platform components are certified by SAP to ensure compatibility when building mixed environments.

SAP's direct sales force receives a 5% commission on the amount of an R/3 sale. In some cases, the commission structure and high price of the R/3 software allows some SAP sales people to make more money than high level executives within the company. SAP also uses customer satisfaction surveys to determine compensation levels for its sales force. The use of customer satisfaction surveys as an incentive forces the sales person to manage the use of partners and internal SAP resources to provide the most effective solution for the customer.

SAP's R/3 architecture is a true three tier architecture; this gives the customer the flexibility to implement and mix and match a one, two or three tier environment. Customers have the flexibility to use different client/server schemes for different functional areas and then tie the entire system together through R/3. SAP's R/3 also allows the customer a wide choice of underlying database architectures.

SAP's integration and use of a three tier client/server architecture, and the compatibly with databases and upcoming Microsoft SQL Server environments, provides a robust environment for transaction based enterprise solutions.

SAP has a significant installed base of R/2 mainframe based users. SAP states it will support and enhance R/2 until the year 2000. SAP's mainframe users that are evaluating client/server solutions will be very likely to move to R/3 if the proper migration tools are available. SAP is also currently riding a wave of high demand for its R/3 software. Assuming this sales trend continues, SAP's challenge is to train more internal and external consultants.

SAP's R/3 has significant multi-language, currency and international legal requirements capability. SAP's target market of F1000 businesses with international sites consider this functionality very important in their efforts to re-engineer international business.

R/3 includes significant integration and workflow automation features that are used for process flow and manufacturing or financial integration.

SAP continues to spend an average of 25% of its revenues for ongoing research and development. SAP continues to investigate new technology such as advanced communications and improved object oriented programming tools.

SAP's Weaknesses

SAP acknowledges the shortage of qualified R/3 consultants, both inside and outside of the company. SAP is ramping up a significant training effort to qualify consultants for SAP sales and to provide training for Logo and Implementation Partners. Some of the Platform Partners, particularly IBM and Digital, will use the internal consultants managing its R/3 implementation to provide external consulting services once the project is completed. In fact, both IBM and Digital report that their consultants will be very savvy in implementing R/3, having managed the process and pitfalls for their own companies before driving external sales of R/3.

R/3 modules, customer support costs (15% of the software cost annually), and the expense of the outside consultants and implementation partners can add up to an enormous project cost. Users agree that the consultants can cost two to fifteen times the actual software or hardware expense. Many customers feel they are at the mercy of the SAP consultant partners, and tend to question the quality of the consulting compared to the cost of the services.

Due to the need for some element of re-engineering, and the integration of the various modules, the implementation of R/3 can range from six months to over two years. The long time frame for installing R/3 can be attributed somewhat to what consultants call 'scope creep.' This is the ad hoc addition of features while the project is underway. Customers are very prone to asking for additional features, somewhat like a child in a candy store, without realizing the impact of new features on the cost or time frame for the project.

R/3 is a very complex software application to implement. Most companies must re-engineer part of their information flows to accommodate the R/3 data fields. Clients or their consulting partners may decide to change some of the data fields within R/3. However, customization of these data fields must be performed by a SAP Engineer, not the customer's in-house staff.

R/3 data fields and modules are more structured than its competitors. This can be a problem for customers with unique requirements for information systems. Some customers like the additional structure, but they tend to fall into certain information technology scenarios. Those companies that are transaction based, or use R/3 for manufacturing for example, find the R/3 structure can be very efficient in their re-engineering efforts.

Virtually all of the high tech system providers are implementing R/3. SAP also has the largest market share of the competing MIS software vendors. With most of the competitors within a given industry group moving to R/3 environments, essentially creating a level playing field, customers must rely on the outside re-engineering consultants to provide a competitive advantage through the new information flows. In a sense, the re-engineering and inherent advantage is only as good as the customer's consultant partner. This weakness is lessened by the customer satisfaction incentive for the partners and direct sales force of SAP. SAP's hands off policy regarding specific recommendations for the use of partners means that it can avoid direct blame for an ineffectual project, but it also has limited control to correct any problems or mistakes in the consulting implementation cycle.

While SAP's reliance on partners for consulting and implementation does provide flexibility for the customers in picking who they want to work with, it also forces all SAP customers to go outside their own firm for help in R/3 installations. Many resent this need for the use of very high priced consulting help.

SAP's R/2 user base will continue to be supported by SAP, but those moving to client/server platforms face an uphill battle in converting the previous R/2 data structures to something SAP's R/3 software can use. The concern of the R/2 users is whether they will be left behind regarding feature enhancements and customer support needs.

SAP is about to begin a significant advertising effort. Up until now, SAP's marketing message has been weak at best. SAP's sales are growing rapidly but more so through the recommendations of its partners and a direct sales effort targeting the very largest multinational companies. One of the recommendations from Digital is that SAP needs to market the hardware and operating system independence of R/3. Further, Digital recommends SAP try to police the sales message from its Platform Partners; inaccurate or misleading sales messages are not corrected by SAP headquarters. Digital finds that the platform partners tend to muddy the waters regarding their relationship with SAP.

SAP's focus on the very large companies for its target market leaves a whole population of companies that still require the same re-engineering benefits, but are too small for the SAP direct sales or the Logo Partners to be considered a viable target for sales. According to an inside sales person at SAP, companies making $50-250 million a year could not get return phone calls from SAP sales.

SAP's Opportunities

SAP has yet to leverage its Platform Partner's distribution channels to increase sales. SAP's Platform Partners sell to smaller businesses which are too small for its Logo Partners; however, they still require similar re-engineering and consulting services. If SAP can determine a way to provide incentives and support to the Platform Partner's reseller/integrator channels, the company would have access to new markets. SAP should keep in mind that these smaller businesses are usually in a growth pattern, and will eventually become a future customer of SAP's Logo Partners.

The Heidleberg Project is an easily configured and installed version of its R/3 software. SAP's goal is to provide a fully functional package that requires less consulting and implementation services to install. The company is targeting the Heidleberg Project for companies that are too small for the Logo Partners to service. The reseller channels of SAP's hardware partners would be a very appropriate mechanism to target the medium size firms that SAP's Logo Partners ignore. The potential problem will be the perception of distribution channel conflict if specific sales incentives are used for resellers. At this time, a company in California has the Heidleberg Project up and running, due to the joint efforts of SAP and Digital. SAP is evaluating whether the Heidleberg Project would be an appropriate product for the reseller channels of its Platform Partners.

SAP's focus on selling to only very large businesses can be viewed in some ways as a missed opportunity. While it makes sense to target the very largest customers, particularly in light of the use of its Logo Partners, there is a largely untapped market of smaller businesses that are facing the very same competitive pressures, problems and concerns as the F1000 clients. SAP's challenge in this regard is to find a way to efficiently sell to and support the smaller business without sacrificing its margin structure or ability to support the customer.

Myriad businesses are using mobile communications and Personal Digital Assistants for its outbound field sales, remote offices and other uses. SAP is working on better integration of portable devices. This is clearly an opportunity for SAP to leverage new technology within its application modules.

SAP is specifically targeting vertical industries with its ICOE program and the enhancement of modules for Banking, Healthcare, and Insurance markets. This is a chance for SAP to build depth in its customer base and to leverage those partners with a particular vertical market expertise or customer base.

SAP has an opportunity to market its hardware and operating system independence, highlighting the variety of choices for the customer. In doing so, SAP must make it clear that it is the customer's choice of environments and consulting/implementation partners. "Have it your way."

Microsoft will be promoting its SQL Server/R/3 compatibility. SAP will be able to garner more sales as Microsoft uses SQL Server as a lever to drive sales for its BackOffice application suite. SQL Server compatibility also provides increased compatibility with database architectures.

SAP is moving toward Intel-based platforms, currently certifying AST, AT&T, Sequent and Compaq systems for R/3. As more Intel-based vendors certify their systems for R/3, SAP customers have more choices at lower price points. Many of the smaller companies that would look at the Heidleberg Project are using Intel systems. Providing SAP software on Intel systems opens up a huge market that is still waiting for robust enterprise software.

SAP's R/3 is now certified on AS/400 systems that use the PowerPC processor. This provides SAP with a significant opportunity in selling to IBM's large AS/400 installed base. IBM's timing of the PowerPC processor availability and the certification of R/3 for those systems gives its customers more options in developing an information infrastructure. IBM and SAP should be able to leverage this captive audience with the promise of efficient MIS solutions, backed by IBM service and support.

SAP's Threats

BAAN is targeting the same market as SAP's Heidleberg. BAAN does NOT want to target the very largest firms, but finds a significant opportunity to sell to the rest of the F1000 companies that are too small for SAP's Logo Partners. BAAN has a clear marketing message that its software is easier to install and configure, highlighting the fact that its Trident information system software can be customized by the user at any time as information needs and processes change. BAAN's message is that companies are continually re-engineering, and they should be able to change the enterprise information system at any point in time without the huge commitment to consultants and the associated expense. BAAN is also evaluating how it can leverage the reseller/integration channels of its partners.

Virtually all of the mainframe-based MIS software providers are developing PC-based software packages. Most of the vendors provide UNIX and RISC-based packages, but all are slow to move toward the Intel-based processors as a server environment. With the Pentium and future Intel processors becoming standard on server platforms, software providers with such compatibility will have a significant marketing message for future sales.

Heidleberg Project may create channel conflict if SAP drives sales through reseller/integrator channels. One strategy SAP may use is to provide a prospective Heidleberg Project customer will a Letter of Understanding at the beginning of the sales cycle. This letter would outline the expectations for the customer including how much application/configuration consulting the customer can expect, how many demonstrations will be performed, and a time table for the sales process. SAP is attempting to drive sales for the lower margin Heidleberg but realizes the sales effort can be just as involved and time consuming as a sale of R/3 software.

Software vendors tie their fate to market forces such as hardware and network computing platforms. Although it seems unlikely, a shift in the core set of technologies used in providing enterprise solutions will force a reinvestment of research and development funds as well as the time to market pressure in developing applications for a new paradigm of computing.

Given its use of independent partners, SAP America does not seem to be prone to antitrust actions in the United States. However, SAP AG and SAP America's Global Account Executives must be cognoscente of the potential for international political actions that may impact SAP's sales effort or installed base. SAP's multinational presence can be effected by nationalization efforts by a host country, or the outbreak of war.

With the problematic migration path for R/2 users, SAP runs the risk of this customer base evaluating other information system software as they move to client/server architectures. Since the Logo and Implementation Partners are completely independent, they will recommend the best system for their customer needs. In this scenario, SAP's R/3 may not be the recommended environment.

Many business are becoming more cautious about re-engineering efforts. Early adopters of the re-engineering concept have experienced many problems in the implementation and roll-out of a new information systems. Those businesses also find the increase in productivity or reduction in overhead expenses is not what was expected. Negative press reports about the cost and implementation time frame of re-engineering also causes business to reconsider such an extensive effort.

PeopleSoft is well known for its Human Resource software and is now adding functional modules to its application suite. PeopleSoft's sales approach is to provide a specific pricing model that shows the total cost of the software, installation, and training. Customers that use the Human Resources module from PeopleSoft will be very likely to add the other modules to fully integrate all aspects of the information system.

Appendices

Appendix A - Customer Lists By Industry

SAP Consumer Packaged Goods Customers

Anheuser Busch

Apple

Black and Decker

Borden

Brach Van Houten Holding

Bristol Myers Squibb

Casa Pedro Domecq

Cheeseborough Pond's

Colgate Palmolive

Con Agra Frozen Foods

Coors Brewing Company

CPC International

DowBrands, Inc.

Eveready Battery Company

FoxMeyer

General Mills, Inc.

Georgia Pacific

Hill's Pet Nutrition

J.J. Heinz Company

Hunt Wesson Inc.

Imperial Tobacco Limited

James River Corp.

Keebler Company

Kraft General Foods

Mrs. Baird''s Bakeries

Nestle Beverage Company Nestle USA, Inc.

OSSRAM Sylvania

Philip Morris International

Philip Morris USA Polaroid Corporation

Procter & Gamble Company

Revlon Inc.

Schering-Plough HealthCare

Schwan's Sales Enterprises

SCIMED Life Systems

Schwans's Sales Ent.

Stouffer Food Corporation

Thomas J. Lipton

Unilever de Puerto Rico

Van den Bergh Foods Company

SAP Utility Customers

Centra Gas

Cincinnati Gas & Electric

Manitoba Hydro

Nova Gas Transmission

Pacific Gas & Electric

Trans Canada Pipeline

Westcoast Energy Inc.

Wisconsin Electric Power

SAP R/3 Customer List for Oil & Gas

Alberta Energy

Amoco Corporation

Caltex Petroleum Corporation

Centra Gas

Cerdec Corporation

Chevron Corporation

Crown Petroleum Corporation

Exxon Company USA

Husky Oil Limited

Imperial Oil Limited

Mobil E&P (Nigeria)

Mobil Marketing & Ref

Nova Corporation of Alberta

Petro Canada Products

Petrotrin (Trinidad)

Schlumberger Oil Service

Shell Canada Limited

Shell Oil Company Inc.

Suburban Propane

Suncor Inc.

Texaco Inc.

Westcoast Energy

SAP High Technology Customers Semiconductors

Analog Devices, Inc.

Applied Micro Circuits Corp.

Broooktree

Burr Brown Corp.

Chipcom Corp.

Intel Corp.

Fujitsu Compound Semiconductor

Kyocera International

Molex Inc.

Motorola Inc.

National SemiConductor

Rockwell International Corporation

Siliconix

SAP High Technology Customers Software

Adobe Systems

Autodesk, Inc.

FileNet Corp.

Informix Corp.

Landmark Graphics Corp.

Mentor Graphics

Micrografx Inc.

Appendix B

SAP Logo Partners

Andersen Consulting

Cap Gemini America

Coopers & Lybrand

CSC Consulting

Dynamic Data Solutions

Ernst & Young

IBM Consulting Group

ICS Deloitte

KPMG Peat Marwick

Origin Technology

Price Waterhouse

Appendix C

SAP Technology Partners

Apple Computer, Inc.

Informix Software, Inc.

Microsoft Corporation

Oracle Corporation

Software AG

Appendix D

SAP Platform Partners

Apple

AT & T

Bull

Data General

Digital Equipment Corporation

Hewlett Packard

IBM

Sequent

Siemens Nixdorf

Sun Microsystems