From Punch Card to Cloud Computing

SAP R/3 was offered on a CD ROM (photo: SAP)

Back in the 1970s, while the world was in the throws of sexual revolution and the Red Army Faction had plunged West Germany into crisis, five former IBM employees joined forces in Mannheim in 1972 to found a company whose name translated as System Analysis and Program Development. What began as a small enterprise is now the world’s largest provider of business software, with around 47,800 employees and offices in more than 50 countries.

Punch cards were used in the 1970s (photo: SAP)

Mainframes and punch cards

Claus Wellenreuther, Hans-Werner Hector, Klaus Tschira, Dietmar Hopp, and Hasso Plattner wrote computer programs for payroll and accounting. In the era of mainframes and punch cards, the goal of the five entrepreneurs was to develop business software capable of processing information in real time. The data was entered on screen, instead of using the punch cards. The “R” in the product name – which stood for “real time” – was destined to play a major role in SAP names until 2003. In 1973, the software module for financial accounting hit the market. The business software began attracting the attention of an increasing number of companies, including the cigarette manufacturer Roth-Händle. The software ran on IBM computers and used the DOS operating system.

Two years later – in 1975 – the software was enabled for purchasing, inventory management, and invoice verification. What was to become SAP’s trademark was already possible back then: all the applications could be integrated. For instance, the data from materials management was transferred straight to financial accounting. This meant that invoice verification and posting could be completed in a single operation.

Next Page: Going international and public

SAP founders: Klaus Tschira, Hasso Plattner, Dietmar Hopp, and Hans-Werner Hector (photo: SAP)
Hasso Plattner at the Stock Exchange (photo: SAP)

Going international

In 1976, the company changed its name to SAP GmbH, becoming a limited liability company. A year later, it moved headquarters from Weinheim to the small town of Walldorf, some 20 miles further south. This was also the year that SAP acquired its first customer abroad, in Austria. The following year, SAP became available in French, when the agricultural machinery manufacturer John Deere opted for SAP’s accounting software.

The company was expanding rapidly. In 1979, the cornerstone was laid for SAP’s own data center in Walldorf. Two years later, SAP presented its wares at a trade show for the first time – at Systems in Munich. Back then, around 200 companies were using SAP software, which had added production management to its capabilities. The company premises in Walldorf were bursting at the seams, so plans were drawn up for an additional building. In 1985, SAP generated sales of 64 million German marks (around U.S.$ 21 million) and had more than 100 employees.

The previous year, SAP (international) AG, was set up in Switzerland, to give SAP even better access to foreign markets. In 1986, more offices were opened in the German cities of Ratingen and Düsseldorf. Two years later, Hamburg and Munich followed. In 1986, SAP’s sales hit 100 million German marks for the first time. A new module for human resources was also launched, and SAP made its first appearance at CeBIT, the world’s biggest computer tradeshow.

Going public

In 1988, SAP went public, and the limited liability company became a stock corporation. More international subsidiaries sprang up in Denmark, Sweden, Italy, and the United States. Subsidiaries in the Netherlands, France, Spain, and Great Britain had already been established the year before. In 1989, SAP branches were founded in Canada, Singapore, and Australia. By the end of the 1980s, SAP had some 1,400 employees.

In 1990 – the year of German reunification – SAP opened its Berlin office in what was to become the country’s new capital. That same year, SAP acquired a 50% stake in the German software company Steeb and took over software vendor CAS.

Next Page: SAP R/3 through SAP Business Suite 7

SAP office in the 1980s (photo: SAP)
Cooperation with Microsoft: Henning Kagermann, Bill Gates, and Klaus Tschira (photo: SAP)

SAP R/3 – database, application, and client

Winter 1991 in the German city of Hanover. At the CeBIT trade fair, SAP presented a computer program for companies that was destined to set new standards for business software: SAP R/3. It was characterized by its special client/server architecture, comprising database server, application server, and presentation layer. The software was structured to match the organization generally found in companies. There were modules for financials (FI), controlling (CO), materials management (MM), sales and distribution (SD), production planning (PP), and human resources (HR). SAP R/3 mapped typical processes for the day-to-day activities of the business world. Users could access their data using a standardized interface. While the predecessor SAP R/2 was designed especially for mainframes, SAP R/3 could be distributed across different computers.

However, SAP R/3 was relatively expensive and time-consuming to implement, because the software had to be configured individually. That’s why mainly large enterprises opted for SAP R/3 – including Coca-Cola, Microsoft, General Motors, Deutsche Telekom, the German post office, and Daimler-Benz. Such big customers had a positive impact on the balance sheet: In 1997, SAP generated sales of more than 6 billion German marks (approximately U.S.$ 3.5 billion) and had more than 13,000 employees.

In 1993, SAP had already began cooperating with Microsoft, with the goal of enabling SAP R/3 for Windows NT. The two software giants cemented their relationship again in 2006 with the joint product Duet.

From SAP R/3 through SAP ERP and SAP Business Suite 7

SAP’s business application software was called SAP R/3 from 1992 until 2003. Then came mySAP ERP. Today, there’s the SAP ERP 6.0 application, which is also part of SAP Business Suite 7. SAP ERP 6.0 is based on the SAP NetWeaver technology platform. The platform was unveiled in 2003 and is a flexible enough to also integrate non-SAP systems using open interfaces.

SAP Business Suite 7 has been officially available since May 2009. As well as containing enterprise resource planning functions, SAP ERP enables companies to work with customer relationship management (CRM), supply chain management (SCM), supplier relationship management (SRM), product lifecycle management (PLM), and special industry solutions. SAP Business Suite is designed for large enterprises that want to reduce their IT costs and optimize their business processes.

With the acquisition of the French company Business Objects in 2008, SAP concentrated its focus on enterprise performance management and business intelligence.

Next Page: Sailing away – the founding fathers step down

Industrial park in Walldorf 1998 (photo: SAP)

SAP discovers the Web and the midmarke

The Web conquered the world. And in 1996, it became possible to hook Internet applications up to SAP R/3 using open interfaces. With SAP Business ByDesign, launched in 2007, SAP presented a solution that is accessed exclusively through the user’s Web browser, with modules that can be rented according to each company’s needs. At its unveiling, Henning Kagermann, who was CEO at the time, spoke of “the most important announcement I have ever made in my career.”

In 2006, SAP further strengthened its position in the midmarket: The SAP Business One application and the SAP Business All-in-One solutions are preconfigured products that cover the most important business processes for small and midsize companies.

Sailing away – the founding fathers step down

When SAP was listed on the New York Stock Exchange in 1998, founding fathers Dietmar Hopp and Klaus Tschira stood down from the executive board and joined the supervisory board, with Hopp becoming chairman. Hasso Plattner and Henning Kagermann became co-CEOs.

In 1999, Plattner announced a new strategy, with a view to becoming even more customer-friendly. The new buzzwords were and EnjoySAP. By the new millennium, SAP had become the world’s leading provider of business software solutions. Five years later, annual sales had increased to €8.5 billion.

SAP acquired the Israeli company TopTier in 2001, and its founder Shai Agassi joined the SAP Executive Board the following year. Léo Apotheker also joined the board in 2002. In 2003, Hasso Plattner, the last of the SAP founders, stood down from board. As a passionate sailor, he received a very special leaving present – a sail signed by all the SAP employees.

When Shai Agassi left the board in 2007, Léo Apotheker became deputy CEO. Agassi’s departure triggered a number of restructuring measures and changes: The SAP Executive Council was founded, comprising corporate officers who report directly to the SAP Executive Board and who are responsible for SAP’s market and product strategy. In 2008, Léo Apotheker and Henning Kagermann were appointed co-CEOs. Erwin Gunst, Bill McDermott, and Jim Hagemann Snabe were new additions to the board.

In 2009 – the year of the global financial crisis, which also affected SAP in the form of revenue shortfalls and layoffs – Léo Apotheker took over the reins single-handedly. Nine months later, he stepped down with immediate effect after a mutual agreement was met with the SAP Supervisory Board not to extend his contract. John Schwarz, who joined the SAP Executive Board following the acquisition of Business Objects, also resigned in 2010. Erwin Gunst stepped down for health reasons and will not return. Gerhard Oswald is the new COO. Meanwhile, Hasso Plattner has reemerged from retirement. At the request of the SAP Supervisory Board, he will again play a significant role in determining the future direction of the company.

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