Enterprise resource planning (ERP) software might not sound all that exciting, but it certainly is big business – just ask SAP, the world’s leading vendor. In 2021, the ERP software market was valued at $50.57 billion; it is expected to grow annually by 10.7% from 2022 to 2030. Like I said, big business. But who is SAP?
SAP SE is a German multinational software reseller that was founded in 1972. The company is based in Walldorf, Baden-Wurttemberg, and focuses on developing enterprise software to manage customer relations and business operations. I’ve worked in several companies where maintaining customer relationships was crucial, and without effective management software, things would have fallen apart very quickly. That’s why big businesses like Burger King, DHL, and Coca-Cola (to name just a few) rely on SAP software to streamline their business operations.
Not only is SAP the largest non-American software company based on revenue, but it is also the world’s fourth-largest publicly traded software company based on revenue and the second-largest German company by market capitalization. As you can see, SAP has more than a few accolades to its name. However, it isn’t all plain sailing for SAP. (Is it ever plain sailing in the world of business? In my experience, no, but I digress.)
The software industry at large evolves rapidly, with innovations changing the state of play almost daily. SAP isn’t a hip startup – it’s been around for fifty years – so keeping up with new industry trends is crucial. However, this isn’t always easy in a large organization established before the dot-com bubble when tech became big business. New companies are constantly popping up with faster, more innovative, and better-value software solutions. SAP is the market leader in ERP software right now, but maintaining that position into the future, while certainly possible, won’t be easy.
Bottom Line Up Front
SAP is the world’s largest non-American software company, so there’s no doubting its success. However, as the software and technology industries continue to evolve rapidly, competition is becoming more fierce from rival firms. The most prominent challenge SAP faces is whether it can continue to innovate in exciting ways. Complacency is, in my eyes, SAP’s greatest enemy right now; if it can resist the urge to ride on the success of bygone years, it will continue to thrive as a company well into the future.
List of SAP’s Main Competitors
- Microsoft Dynamics 365 Business Central
SAP Business Strategy
SAP has a mass-market business model which targets enterprise customers, meaning the company focuses on B2B rather than B2C. It deploys several revenue strategies, including licensing its software products and subscriptions to cloud solutions and support. SAP’s business suite, its most popular product, includes:
- ERP – enterprise resource planning
- CRM – customer relationship management
- PLM – product lifecycle management
- SCM – supply chain management
- SRM – supplier relationship management
It also offers other products, such as:
- Netweaver platform – focuses on market development
- Business ByDesign – software for small-to-medium enterprises (SMEs)
- SAP Business all-in-one – business solutions for SMEs
- Business Objects – reporting
SAP’s product strategy is responsible at least partly for the company’s success; with a long product lifecycle and constant improvement-based rollouts, SAP can acquire customers and often keep them for life. In 2021, SAP generated revenue of 27.84 billion euros, a 2% increase year on year. Today, SAP is focused primarily on moving customers to the cloud; this forms a significant pillar of the company’s growth strategy. Since 2012, SAP has acquired companies that sell cloud-based products, including a few multi-billion dollar acquisitions like Ariba for $4.3 billion, which some have called an attempt to overshadow main competitor Oracle. Further, in 2014, SAP partnered with IBM to sell cloud-based services.
Precedence Research estimates the global cloud software market size to hit $1,614.10 billion by 2030, so this is a strategy that is, in many ways, ahead of the curve. The numbers reflect the strength of SAP’s growth strategy. In 2021, the company’s cloud revenue increased by 17% to 9.42 billion euros. Customer retention is another crucial pillar of SAP’s business strategy; the idea is to ensure that existing customers continue to renew existing licenses and subscriptions. The company must conduct sufficient research and development, creating new products and improving existing ones. SAP has a customer base of over 425,000 in over 180 countries, so it’s hardly surprising that the focus is on retention.
SAP Competitors Analysis
SAP’s most prominent competitor is Oracle, but many other firms offer similar software and, as a result, pose a significant threat to SAP’s market share.
1. Microsoft Dynamics 365 Business Central
Microsoft is a tech behemoth with its fingers in every pot. Because it is successful in many areas, it can support even weaker aspects of its business using revenue from better-performing products. You’ve probably heard of Microsoft Teams and Microsoft Office, but what about Microsoft 365 Business Central? Microsoft’s cloud-based business management system for SMBs allows businesses to:
- Move to the cloud faster
- Unlock business insights and productivity
- Boost sales and improve customer service
- Finish projects on time
- Increase business and financial performance
- Optimize supply chain and inventory management
Interestingly, Business Central was first published as Dynamics Nav and Navision until Microsoft acquired it in 2002. SAP will need to utilize this strategy effectively if it wants to retain its market share – it needs to acquire new software that is different from its original offering, allowing the company to enter new markets. It wasn’t until April 2018 that Business Central, as we know it today, was released. Plans were immediately laid out for semi-annual releases to keep the product up-to-date.
Given Microsoft’s late entry into the world of enterprise resource planning systems, it’s almost surprising that the platform accounts for more than half of Microsoft’s $3 billion business apps revenue. It is almost surprising, but not entirely, due to what I mentioned earlier: Microsoft is a successful company (it made more than $168 billion in annual revenue in 2021, an 18% increase year-on-year), so any new products it launches are bound to be successful.
Further, I think coming to the ERP market late may have been advantageous for Microsoft. While SAP has had to rethink and redevelop old software to meet the demands of the modern market (don’t forget, SAP has been around since the early seventies!), Microsoft hasn’t had to face these challenges with Business Central. Microsoft created the platform in 2018, and the tech landscape hasn’t changed drastically.
Microsoft uses a subscription revenue model with three different plans:
- Essentials – $70 per user/month
- Premium – $100 per user/month
- Team Members – $8 per user/month
While experts widely regard Business Central as being better than SAP Business One for SMBs focused on scalability and growth, it’s important to note that SAP offers more tools to businesses, including large companies than Microsoft. Microsoft Business Central has just a 0.74% share in the ERP market. SAP, on the other hand, has a 7.92% share.
Infor is an American multinational enterprise software company founded in 2002 in Malvern, Pennsylvania. Today, its headquarters are in New York City, and Infor provides cloud-based business applications for organizations.
Initially, Infor was focused primarily on enterprise resource planning software, but since 2010 it has taken a new strategic direction towards industry niches. As such, the solutions it offers are extensive:
- ERP and financials
- Services and sales
- Advanced analytics
- Supply chain management
To deploy its cloud applications, Infor uses open-source software platforms like Azure and Amazon Web Services. Infor has over 14,000 cloud and 90,000 corporate customers overall – a modest number compared to SAP’s 425,000, but big companies like Heineken, Ferrari, and Best Western International are among them. Infor hit $3.2 billion in 2019, which again is less than SAP’s 27.55 billion euros (the equivalent of roughly $28 billion).
I know what you’re thinking – “is Infor a competitor of SAP?” – and I know why, but hear me out. Infor was established much more recently, and while it hasn’t reached the level of SAP yet, it has the potential to get there. Infor’s current strategy – to move into industry niches – is a clever one that SAP may do well to consider. Providing specialized cloud tools for, say, hospitality or healthcare businesses will lead to a greater level of customer satisfaction and, thus, retention. What would you go for if you had to choose between a generic suite of ERP tools and a suite tailored to your business’s specific needs? I think I already know the answer.
Today Infor is financially sound, but it hasn’t always been that way. In 2017, the company was valued at $10 billion and was $6 billion in debt, and this valuation followed a $2.5 billion investment in Infor by Koch Industries. In 2020, Koch Equity Development LLC purchased total equity in the company, resulting in a valuation of $11 billion. By July, Infor had paid off $5 billion in debt, achieving an investment-grade rating and securing its position as one of the most financially sound enterprises in tech. To date, Infor has made 51 acquisitions, each of which has played a crucial role in strengthening its position as one of the leading ERP and technology companies.
Oracle Corporation, an American multinational computer technology corporation, is by far the biggest competitor of SAP. It was founded in 1977 – just a few years after SAP – and is headquartered in Austin, Texas. Like SAP, Oracle generates revenue by selling and licensing software, including ERP software, database software, CRM software, human capital management software, and enterprise performance management software. The company offers a suite of tools to help businesses run more effectively.
Oracle was the world’s third-largest software company in 2020 based on revenue and market capitalization, while SAP was the fourth largest. Believe it or not, these companies haven’t been going head-to-head since day one. There was initially a brief period of cooperation between them, which began with integrating SAP’s R/3 enterprise application suite with Oracle’s relational database products. However, things soon turned sour. A series of acquisitions by Oracle in 2004 led SAP to recognize the other company was quickly becoming a competitor in areas where SAP had previously been the market leader.
Rivalry grew between the two rapidly, culminating in Oracle filing a lawsuit in 2007 against SAP which didn’t end well for the accused, as I mentioned earlier in this article. Recently, Oracle’s chairman has discussed how lots of SAP customers are moving to Oracle; whether this is true or not will become apparent over the next few years. Right now, Oracle has 70 million users, but not all of these will be paying customers. For now, the two companies are closely matched, so I’m sure you’re eager to hear how much revenue Oracle makes. In 2021, the company earned $40.479 billion, outperforming SAP by over $10 billion. Despite generating more revenue than SAP, Oracle’s share within the ERP software market is smaller at 5.74% compared to 7.92%. To compete with Oracle, SAP needs to expand its offering by providing a more comprehensive range of easily integrable software solutions. Given the lawsuit that Oracle filed, I think a more significant investment in research and development would be beneficial to continue finding ways to set SAP’s software apart.
Founded in 1999 and headquartered in San Francisco, California, Salesforce, Inc. is a cloud-based software company that provides CRM software and other applications focused on marketing automation, sales, customer service, analytics, and application development. Of all the companies in this article, Salesforce is the one I’ve encountered the most throughout my career.
Like Infor, Salesforce’s strategy is also partially focused on specific industries such as automotive, education, financial services, and a whole host of others. As a result, the company’s targeted marketing is highly successful. Another crucial pillar of Salesforce’s success comes from its annual Dreamforce conference and the sense of community the company has built over the past two decades. Salesforce held the first of these conferences in 2003; the following year, the company started trading on the New York Stock Exchange and managed to raise $110 million.
The company hit annual revenue of over $1 billion in 2009. In 2021, Salesforce’s revenue was $21.25 billion, slightly less than SAP’s. However, the company saw considerable growth between 2020 and 2021 – an increase of over $4 billion – showing it is now on a steeper trajectory than SAP. Salesforce has over 150,000 customers, from small businesses to Fortune 500 companies, and is known as the world’s leading CRM platform. This is where SAP and Salesforce crucially differ; SAP’s focus is on providing a comprehensive suite of ERP tools for SMBs, all of which are valued equally, whereas Salesforce while having several solutions available, is primarily focused on just one.
SAP SWOT Analysis
Below is a SWOT analysis of SAP to better understand the company’s strengths, weaknesses, opportunities, and threats.
- SAP has a strong focus on research & development to keep their products up-to-date and thus improve customer retention
- The software does not require physical distribution, making it easier and cheaper to operate in markets around the world
- SAP has a global presence and is one of the largest software builders
- The company has a low-cost structure
- Employees are highly skilled and motivated thanks to investment from SAP
- SAP has a strong product portfolio that provides a range of business solutions
- There is good brand awareness within the business world
- The company has successfully forged strategic partnerships to strengthen its position
- SAP has some impressive customers like Burger King and Coca Cola
- There have been some failed mergers in the past aimed at vertical integration
- Centralized decision-making takes time
- The software requires highly trained staff to use it, which may put potential customers off
- SAP’s products are costly compared to some alternatives on the market
- SAP spends less money than some of its competitors on R&D
- The company has inefficient financial planning
- In 2007 Oracle filed a lawsuit against SAP for unfair competition and malpractice; SAP lost in 2010 and had to pay $1.3 billion – the most significant copyright infringement judgment in history at the time. This severely damaged SAP’s reputation
- Technology is constantly evolving; SAP can use new developments to create additional products
- E-commerce has massive potential that SAP can continue to take advantage of
- Governments are focused on going green; SAP could target state and federal contractors
- SAP can capitalize on the growing demand for digital services
- There are plenty of ways SAP could expand its product range
- Regulatory and legal changes for businesses could impact the viability of SAP’s software
- SAP faces stiff competition from other large firms like Oracle, who offer very similar products
- Global economies have suffered due to Covid-19; SAP may have to lower the price of its products to sustain business
- Technological advancements could pose a threat if a rival firm utilizes a discovery to get ahead
SAP Competitors Analysis FAQs
Question: Which company is SAP’s biggest competition?
Question: What makes SAP unique?
Answer: In my opinion, it’s the fact that SAP has existed for five decades, so it has an unmatched understanding of the needs and desires of the customers it serves. The company profoundly understands business processes and how to streamline them using tech.
Question: Is SAP a good company to work for?
Answer: SAP has a rating of 4.4 stars on Glassdoor, indicating it is a good place to work with above-average employee satisfaction. In particular, employees have praised the company for offering good career progression and training.
SAP operates in the enterprise resource planning market and enjoys a reputation as the largest non-American software company in the world. It was founded five decades ago, which can be viewed as both a strength (few companies have such a deep understanding of the needs of SMBs) and a weakness (technology evolves rapidly, and SAP’s software may be seen as outdated).
Many companies offer similar software, many of which have embraced the jump to cloud-based services faster. To maintain SAP’s large market share, the company must invest in more research and development to ensure its products are unique, up-to-date, effective, and easy to use.