Key Trends Impacting ERP Software Revenues For SAP In 2014

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German software developer SAP AG (NYSE:SAP) is the global leader in ERP (enterprise, resource, planning) application software, with a market share of approximately 24.6% in 2012 and annual revenues exceeding $6 billion. ERP software product sales contribute to about 31% of SAP’s stock price, and is the most important driver for the company. SAP offers ERP software modules that serve companies across various operating groups (such as sales and marketing, finance, supply chain and logistics, engineering and manufacturing etc.), allowing them to manage and optimize their resources through its products, including Business All-in-One, Business ByDesign, Business One, Business Suite and mySAP.

In the current article, we study SAP’s ERP software division and take a look at the various trends shaping the global ERP market.

Check out our complete analysis for SAP

HANA Integration To Drive ERP Sales For SAP

Since the launch of its high performance HANA platform, SAP has been integrating its application software modules with the in-memory platform to boost processing rates. In November 2013, SAP rolled out its Business All-in-One application powered with the HANA platform, for key industries in 52 countries globally. The integrated offering could be deployed on-premise as well as through a private cloud placement for more than 24,000 Business All-in-One customers. [1] Additionally, SAP has previously integrated its Business Suite software with the HANA platform. [2]

Going forward, we expect to see further integration of the HANA platform into SAP’s ERP application software packages. Moreover, the rapid rise in demand for SaaS offerings as opposed to on-premise offerings should accentuate the company’s position within the ERP market and boost cloud subscription revenues for SAP in the future.

Cloud & Mobile ERP Offerings To Expand Rapidly In 2014

SAP posted triple-digit growth in cloud subscription revenues for the three quarters in 2013, from €183 million in 2012 to €547 million in 2013. According to technology research firm Gartner, public cloud services globally are expected to reach $131 billion in 2013, up from $111 billion in 2012. [3] Software-as-a-Service offerings are expected to account for 14.7% of the estimated $131 billion cloud service revenues in 2013. [3] This translates into approximately $20 billion in cloud application sales in 2013, and presents a huge opportunity for on-premise software developers such as SAP, Oracle and IBM.

The adoption of ERP software by small and medium enterprise (SME) businesses is also crucial to SAP’s future growth in the ERP division. The SME ERP market lacks strong presence of legacy ERP systems due to their smaller financial position. Moreover, increasing demand for interaction and collaboration between application suites for business streamlining has favored the launch of modern, flexible cloud-based systems that are being adopted by SMEs. [4] SAP’s competitor NetSuite leads the cloud ERP market space [5], and given that SME businesses prefer low cost on-demand offerings, SAP could face significant competition in entering the legacy-absent SME ERP market.

Additionally, mobile ERP platforms are expected to take center stage in the future, with business processes being conducted on smartphone and tablet devices rather than on personal computers. [6] SAP is positioned to gain the most from the move to smartphone and tablet devices, with its Mobile Application Development Platform having a 49% market share in 2012 according to IDC. [7] IDC estimates the market size of the Mobile Enterprise Application Development Platform to increase at an annualized pace of approximately 39% through 2017, and reach close to $4.8 billion from its current size of $938.5 million. Going forward, we believe SAP will increase its focus on cloud and mobile ERP product offerings, in line with the current market migration towards enterprise mobility and cloud ERP solutions.

We currently have a $80 Trefis price estimate, which is 5% below the current market price.

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Notes:
  1. SAP® Business All-in-One Solutions Powered by SAP HANA® Now Globally Available in 52 Countries and for Key Industries, SAP Newsroom, November 2013 []
  2. SAP® Business Suite Powered by SAP HANA® Reinvents the Real-Time Enterprise, SAP Newsroom, January 2013 []
  3. Gartner Says Worldwide Public Cloud Services Market to Total $131 Billion, Gartner Newsroom, February 2013 [] []
  4. ERP Trends for 2014, Midsize Insider, January 2014 []
  5. NetSuite ERP []
  6. Top 8 ERP Trends for 2014, enterpriseappstoday.com, December 2013 []
  7. SAP Leads Burgeoning Mobile Enterprise Application Development Platform Market, SAP Newsroom, November 2013 []
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  • commented 5 years ago
  • tags: SAP
  • I was wondering to know about the benefits of using BPMN2 over US Crossfunctional notations in case of defining the IT business processes ? Which is used the most and why? your response will be greatly appreciated
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  • commented 5 years ago
  • tags: SAP
  • Very nice to share my feelings here. I wana discuss about ERP Softwre.
    What is ERP Software/what is the task of ERP Software?
    ERP Software: ERP (Enterprise resource planning) is business management software, usually a suite of integrated applications that a company uses to manage business processes.
    Including:
    Product planning and development
    Manufacturing
    Marketing and sales
    Inventory management
    Shipping
    HR
    ERP Software can help you to run your Corporation in one platform from where you can manage your total business.

    ERP Software Bangladesh