SAP'S EXTERNAL FINANCIAL REPORTING
SAP External Financial Reporting
SAP's external financial reporting
History of SAP
SAP has a proud 40-year history that is founded on their mantra of innovation. Their success has come from their innovative culture. The company was founded in 1972 when five like-minded former IBM employees came together and created a company with the vision of providing clients with technological innovations. The company was called Systemanalyse und Programmentwicklung (SAP) which was German for System Analysis and Program Development. The company's vision was to provide standard application software for real-time processing of data. It was formed as a private partnership under the German Civil Code with the headquarters in Weinheim, Germany Mohapatra, 2009.
The company began with only one customer, Imperial Chemical Industries (ICI) and at the time, they had just nine employees. At the end of the first year, the company had generated DM 620,000 in revenue Volkmann, Tokarski, & Grunhagen, 2010()
In 1973, the company designed its first financial accounting system which was known as RF. This attracted more customers and helped the company to grow its bottom line. One year later in 1974, SAP demonstrated flexibility by converting the RF financial system from the DOS operating system to OS. This was done over a period of 8 weeks. By the end of the first two years, SAP had a list of 40 customers. The company then launched their RM system in 1975 which helped companies handle more processes such as inventory management, invoicing and purchasing. This was then followed by integration of all applications to form an enterprise resource planning system (ERP) Adam & Sammon, 2004()
In 1981, the private partnership was dissolved and its rights passed on to SAP GmbH which was first formed as a sales and support subsidiary to SAP in 1976. By this time, the company had about 30 employees and a revenue base of DM 3.81 million. At the same time, the company redesigned its product and launched SAP R/2. Seven years later in 1988, SAP GmbH transferred into SAP AG which was short for Aktiengesellschaft (corporation). The company started publicly trading on November 4th on the Frankfurt and Stuttgart stock exchanges. The company was listed on the Dow Jones in September of 2003 Volkmann et al., 2010()
Over the years, SAP has also acquired several companies. In 2008, it acquired Business Objects which was a business intelligence company. The company's products were added to SAP's portfolio. Two years later in 2010, the company acquired Sybase which was the largest business service and software provided and specialized in management of information and use of mobile data. In 2011, SAP AG acquired SuccessFactors Inc. To enable it gain competitive advantage against Oracle Corporation in cloud computing. In May of 2012, SAP AG stated its plans to acquired Ariba Inc. subject to shareholder and regulatory approval.
Company overview
The company focuses on six sectors of the industry which are discrete industries, process industries, consumer industries, financial services, service industries and public services. The company has a market capitalization of $86 billion with a well-balanced shareholder structure. The shareholders continuously participate in the success of SAP through dividend payouts and share buybacks. In the 2011 financial year, the company had total revenue of 14.23 billion euros and profit after tax was 3.44 billion euros. The shareholders were given a dividend of 1.1 euros per share in the first half of 2012 which was an increase from the 0.6 euros per share that they were given the previous year SAP, 2012()
SAP prides itself in having a robust business model where software revenue is the most important driver of revenue. The company generates additional revenues from other services such as customer support, maintenance and consultancy. Software revenue is realized through sales of licenses for the use of SAP products. The company provides their software licenses as a package with maintenance service which is calculated monthly. This model allows the company to gain one-time revenue through software licenses and recurring revenue from monthly maintenance services. This has allowed the company to maintain strong growth while at the same time allowing them to be shielded from economic fluctuations that come as a result of recurring revenues forming a significant part of the company's total revenue SAP, 2012()
Global market overview
SAP is the largest business software company in the world and has the third-highest revenue as an independent software provider. The company operates in four geographic regions: America which includes the United States of America and Canada, APJ which are the countries in the Asia Pacific region and Japan, EMEA which are the countries in Europe, Middle East and Africa and LAC which are...
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