The technology industry is an untamable beast, and it’s growing more powerful by the day. This year, the combined market value of the big four — Amazon, Apple, Facebook and Google — has exceeded $4.5 trillion. But as we venture further into the future of tech, only a few businesses will see enough success to place them among the upper echelons of the market — rubbing shoulders with the companies that pioneered the space.
One of these companies is SAP SE, the German software multinational that first broke onto the scene in 1972. Even if you’ve never heard of SAP, you’ve probably purchased some of its clients’ products — the tech giant has helped the likes of Apple, Amazon and Google get to where they are today. So, some 50 years on, what has SAP achieved, and what could its future hold? Let’s take a look.
What is SAP?
SAP SE was founded by a group of five ex-IBM employees in Germany, with the shared vision to create a piece of IT software that integrated a range of business processes in real-time. They came to produce many iterations of SAP’s flagship enterprise resource planning (ERP) software, the first known as ‘RF’, and sold its licence on to various international clients. These include the likes of Burger King and The Coca-Cola Company. Nowadays, SAP is an industry in and of itself. The software saw huge rates of adoption through the millennium, went online to support modern e-commerce, and now has a turnover of over €5.1 billion, Its latest ERP product is SAP S/4HANA, which introduced mobile integration and a new cloud edition to better equip dispersed workforces and digital-first businesses.
In its meteoric rise as a crucial business tool, SAP’s software not only helped to revolutionise industries, but also opened up a new field of employment in SAP implementation. Recruitment firm Eursap sheds light on the benefits of the career path, explaining that SAP “is used by enterprise companies across all industry sectors”, and “offers challenging work, teaching cross-transferable skills and offering on-the-job learning.” As a result, SAP has firmly established itself as an industry leader, powering business solutions globally and creating jobs for many.
What challenges does SAP face?
With decades of trailblazing to its name, SAP will be looking to keep ahead of trends and the competition in the coming years. So far, the company has successfully navigated changes such as the move to e-commerce and cloud adoption, but will need a finger on the pulse of new developments occurring across the tech market. But what obstacles could SAP encounter?
An unstable economic climate is one of the biggest challenges currently threatening businesses. Following years of consistent — and at times explosive — growth, recent events associated with the Covid-19 pandemic have seen stock prices for many previously stable companies drop. Back in late 2020, SAP’s stock value plunged and has since failed to recover to its height of pre-pandemic levels, while competitors have experienced more consistent levels of growth.
Going forward, uncertainty for SAP remains. Many businesses have seen supply chains interrupted due to critical labour shortages, industrial action and the Ukraine conflict, and compounding this uncertainty is the ongoing energy crisis. According to the International Energy Agency, the crisis has driven up inflation and stagnated economic growth, pushing some countries into recession. Ultimately, this global economic downturn that we are experiencing could continue to challenge SAP’s growth for the foreseeable future, and most recently, the company has lowered its 2022 profit outlook.
In response to slowing profits, SAP is revising its strategy. Like all of the large entities operating in tech, and indeed all wider multinational business ventures, SAP bears the responsibility of practising sustainable business. As such, the company has committed to becoming carbon neutral by 2023, with measures such as 100% renewable energy adoption to power its facilities. However, the greatest challenge here is in selling SAP’s new, more sustainable product, as the company attempts to convince its stakeholders of the business value that “green innovation” offers.
Ambassadors including SAP’s own CEO Christian Klein spoke of how the company is attempting to revolutionise the future of sustainable tech at 2022’s SAP Sapphire conference. SAP will offer solutions such as SAP Concur, which measures the carbon footprint of business travel, and the SAP Cloud for Sustainable Enterprises, which helps to “reduce emissions, minimise waste, and improve social equality while reporting ESG performance”.
In order to re-focus its efforts and sustain its relevance in the tech sphere, SAP needs to attract the best new tech talent to the company’s newly revamped SAP developer community. The problem is, the world is experiencing a shortage of tech talent. In recent years, short-term skills shortages have emerged across several industries due to the Covid-19 pandemic. But despite many sectors having returned to regular activity in 2022, Statista reports that 70% of organisations are still experiencing a tech skills shortage that is holding back growth.
This is especially pertinent for SAP, which has a history of difficulty in retaining developers. The community has continually discussed some of the issues that SAP developers face, including an outdated licensing model and the challenges of intellectual property protection. Put simply, commentators argue that these internal conflicts have set the narrative that “SAP is not considered a ‘cool’ place to do development.”
The bottom line
Looking to the future, SAP will require its customers to believe in the return on investment that the tool could provide through challenging economic circumstances. Contingent on this is whether the company can persuade customers of the benefits of its new sustainable solutions. Early indicators are promising, however, with nearly two-thirds of business owners claiming to want to be more environmentally friendly in their operations. Lastly, SAP will need to consider strategies to entice developers back to its community to sustain the relevance of its products.
Time will tell if SAP is able to continue as a superpower in a market that is constantly evolving — but if one thing’s for certain, it’s that the software giant has a track record of doing just this for the last 50 years.