SAP AG 2006
CASE: SM-153
DATE: 08/08/06
SAP AG IN 2006:
DRIVING CORPORATE TRANSFORMATION
Success can be seductive. It can trick us into focusing too rigidly on long-established patterns of thought. That’s why it is often so tempting to recycle yesterday’s ideas to form the guidelines and dogmas of tomorrow. I hope that we can use the right vision and strategy to avoid this trap.
⎯Henning Kagermann, CEO, SAP AG
INTRODUCTION
On a windy April evening in Walldorf, Germany, Henning Kagermann took a sip of his tea and picked up the 60-page document lying on his desk. Several months earlier, Kagermann, CEO of
SAP AG, had tasked his Corporate Strategy Group with preparing a strategic analysis, informally nicknamed the “Sun-Tzu document” in deference to the legendary Chinese general. It outlined the strategic opportunities and challenges that SAP should expect to face between 2006 and
2010, and examined the prevailing forces shaping the enterprise software industry in 2006: technological change, consolidation, and shifting customer needs.
Kagermann believed that emerging Internet-based technologies and standards known collectively as “Web services” soon would transform the $79.8 billion enterprise software applications industry, in which SAP held the leading market position.1 Although sales of SAP’s existing products had begun to rebound in 2004 after a multi-year slowdown, Kagermann had committed
SAP to deploy new Web services-based technology on a massive scale by the end of 2007. (See
Exhibit 1 for an overview of SAP’s financial performance.) He also had announced several growth initiatives that hinged on the implementation of SAP’s recently defined Web services strategy, which was based on a framework SAP called the Enterprise Services Architecture
1
“Worldwide Enterprise Applications 2006-2010 Forecast,” IDC, #201791, May 2006. Figure denotes 2006 estimated worldwide market size based on software license, maintenance, and subscription revenues but excluding consulting, support,
DATE: 08/08/06
SAP AG IN 2006:
DRIVING CORPORATE TRANSFORMATION
Success can be seductive. It can trick us into focusing too rigidly on long-established patterns of thought. That’s why it is often so tempting to recycle yesterday’s ideas to form the guidelines and dogmas of tomorrow. I hope that we can use the right vision and strategy to avoid this trap.
⎯Henning Kagermann, CEO, SAP AG
INTRODUCTION
On a windy April evening in Walldorf, Germany, Henning Kagermann took a sip of his tea and picked up the 60-page document lying on his desk. Several months earlier, Kagermann, CEO of
SAP AG, had tasked his Corporate Strategy Group with preparing a strategic analysis, informally nicknamed the “Sun-Tzu document” in deference to the legendary Chinese general. It outlined the strategic opportunities and challenges that SAP should expect to face between 2006 and
2010, and examined the prevailing forces shaping the enterprise software industry in 2006: technological change, consolidation, and shifting customer needs.
Kagermann believed that emerging Internet-based technologies and standards known collectively as “Web services” soon would transform the $79.8 billion enterprise software applications industry, in which SAP held the leading market position.1 Although sales of SAP’s existing products had begun to rebound in 2004 after a multi-year slowdown, Kagermann had committed
SAP to deploy new Web services-based technology on a massive scale by the end of 2007. (See
Exhibit 1 for an overview of SAP’s financial performance.) He also had announced several growth initiatives that hinged on the implementation of SAP’s recently defined Web services strategy, which was based on a framework SAP called the Enterprise Services Architecture
1
“Worldwide Enterprise Applications 2006-2010 Forecast,” IDC, #201791, May 2006. Figure denotes 2006 estimated worldwide market size based on software license, maintenance, and subscription revenues but excluding consulting, support,