Tags: SAP Cornering 11 Billion ‘Green’ Software to Take On IBM

SAP Cornering $11 Billion ‘Green’ Software to Take On IBM

Tuesday, 17 May 2011 11:45 AM

SAP AG, the world’s largest maker of business management software, is cornering a 7.5 billion-euro ($11 billion) market for products that help companies increase productivity while limiting the effect on the environment.

At its annual Sapphire conference this week in Orlando, Florida, SAP is showing how software that lets businesses monitor and manage such things as their carbon footprints and the number of employee sick-days can couple with new mobile and data-analysis products to boost efficiency.

SAP’s sustainability software, used by about 1,700 customers, was one of the company’s fastest growing segments last year, said Daniel Schmid, vice president of sustainability operations. Large enterprises worldwide will spend as much as $12 billion on software and hardware related to sustainability this year alone, according to researcher Gartner Inc.

“SAP is a good distance ahead of the field,” said Stephen Stokes, managing vice president at Gartner. To compete with International Business Machines Corp., which incorporates both software and hardware solutions in its Smarter Planet offer, SAP will need to find business partners, he said.

Among customers that purchased SAP’s sustainability software are Baker Hughes Inc., the oilfield services provider, Deere & Co., the largest maker of farm equipment, and De Beers, the world’s biggest diamond-producer, according to the Walldorf, Germany-based software company.

McKinsey Study

“It’s a sizeable business for us,” Peter Graf, SAP’s chief sustainability officer, said in an interview in Orlando. “We’ve just started, this is a young discipline.”

Sustainability software generated a three-digit million euros amount in revenue for SAP last year, Schmid said. In a joint study with McKinsey & Co. on the market, SAP predicted that the addressable market for SAP’s solutions would be worth as much as a total of 7.5 billion euros between 2009 and 2014.

Adrian Bowles, vice president and principal analyst at Constellation Research Inc., recently analyzed software offerings for energy and carbon management and named companies like Hara Software Inc. and C3, founded by Thomas Siebel. Hewlett-Packard Co. has struck partnership deals with both.

“We have deep pockets to invest,” Graf said, citing SAP’s acquisitions of Clear Standards, a carbon-management software company and Technidata, which makes software helping companies comply with environmental, health and safety regulations. “We might acquire more companies in the future if we feel like speed to market is essential.”

Dell, China Telecom

Since co-chief executive officers Bill McDermott and Jim Hagemann Snabe took the helm from the now Hewlett-Packard CEO Leo Apotheker in February last year, they have pursued a three- pronged strategy of making SAP software available on-premise, on-demand and on-device, the latter with the $5.8 billion acquisition of Sybase Inc., a maker of mobile-device applications.

Among deals struck at the Sapphire conference is an agreement to make SAP applications and the real-time analytics technology Hana available to Dell Inc. customers. SAP also signed a pact with China Telecom Corp., under which the Chinese phone company will sell SAP’s on-demand software Business ByDesign to small and medium-sized companies.

China Telecom estimates the addressable market to be more than 1 million businesses, SAP said. The German company released its ByDesign software in July last year after more than two years of delay. SAP said last month it is on track to win 1,000 customers by the end of this year.

Share Gain

SAP is targeting annual sales of 20 billion euros by the middle of the decade. In 2010, its revenue amounted to 12.5 billion euros.

SAP lost 58.5 cents, or 1.3 percent, to 43.82 euros at 9:16 a.m. in Frankfurt, giving the company a market value of 53.7 billion euros. Before today, the stock had gained 17 percent this year, compared with a 2.3 percent increase by the 65- company Bloomberg World Software Index. IBM gained 15 percent, while Oracle Corp., SAP’s archrival, was up 9.2 percent.

Other functions SAP’s sustainability software offers include helping businesses track how much of their energy consumption comes from wind and solar power and measure the level of customer satisfaction.

“In the past, companies thought that either you are profitable or you are sustainable,” said SAP’s Schmid. “During the crisis, companies realized if you are more sustainable that leads to increased profitability. Sustainability is really a driver for innovation.”

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SAP AG, the world s largest maker of business management software, is cornering a 7.5 billion-euro ($11 billion) market for products that help companies increase productivity while limiting the effect on the environment. At its annual Sapphire conference this week in...
SAP Cornering 11 Billion ‘Green’ Software to Take On IBM
Tuesday, 17 May 2011 11:45 AM
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