SAP Sketches Out Plans for the Long Haul

SAP says its goal for 2010 is to quadruple earnings; the company also plans to "industrialize" software development.

With a fervor not generally seen in earning calls, SAP AG laid out its plans for 2006—as well as for the next four years.

During its Jan. 25 fourth-quarter and full-year 2005 earnings call, SAP said its goal for 2010 is to quadruple earnings by increasing the "addressable market" to $70 billion, 50 percent of that through new products.

"Well have about 100,000 customers, with 40 to 45 percent order entry coming from the market," said Henning Kagermann, SAPs CEO, in Walldorf, Germany. "New sources of revenue with high margins will be developed."

At the same time, with the completion of its Enterprise Services Architecture in 2007, SAP plans to "industrialize" software development, with more variants available at lower cost with higher margin, Kagermann said.

The platform play is one thats relatively new to SAP. The company entered the infrastructure market with its 2003 announcement of its ESA strategy and underlying NetWeaver technology stack.

With NetWeaver, SAP upped the ante in terms of a competitive landscape, pitting SAP against Oracle, Microsoft and IBM not only in the applications area—or services, as companies move toward componentized applications and SOAs (service-oriented architectures)—but also in the middleware space that includes application development.

/zimages/6/28571.gifClick here to read more about SAPs SOA plans.

Not by coincidence, SAP, Oracle and Microsoft are all on the same trajectory when it comes to componentizing their applications and adding underpinning that with a services-based infrastructure.

The big difference: SAP has about a two-year lead on Oracles Fusion Applications and Microsofts Dynamics—both expected around 2008.

And SAPs numbers are hard to argue with.

The company saw an 18 percent software revenue increase over 2005, with another 18 percent increase in the fourth quarter.

For the first time, the company sold $1 billion worth of software in North America, where there was a 31 percent increase in software sales, and saw $3 billion in total revenue for the region—a key competitive area for SAP and Oracle.

"Despite the acquisitions of others, we continue to be the clear leader in the U.S.," said SAP Executive Board Member Leo Apotheker, referring to Oracles dozen acquisitions in as many months.

With respect to middleware—where the battle looks to be played in the future—SAP reported 500,000 million euros generated by NetWeaver this past year, or 6 percent of SAPs software revenues.

"One-third of this is stand-alone, where no other applications come in," Kagermann said.

Despite its runaway success over the past year, SAP is far from where it wants to be in 2010.

Next Page: SAPs road map.