SAP is a German business software manufacturer that is in the top 10 of the largest software companies worldwide among Google, Microsoft, and IBM.
- 437,000+ customers in 180+ countries,
- 98,600+ employees, and
- 340+ products.
If you like to learn almost anything about SAP, then this article is for you.
Let us get right into it.
SAP in a Nutshell
SAP exists just because of IBM (International Business Machines Corporation).
Five former IBM employees founded SAP because IBM canceled a project the five employees worked on.
Furthermore, they and IBM could not agree about who will work with whom in the following project.
Therefore, the five IBM employees quit IBM and started SAP.
SAP started as a small software startup in Germany with one pilot customer and without any product yet.
SAP developed its first product on-site of its first customer, the German branch of the ICI (Imperial Chemical Industries) Group.
SAP’s first product was a financial accounting software called RF (Real-Time Finance.
RF rapidly conquered the market in times of traditional business devices such as calculators and punch cards.
Now SAP is the
- market leader in the ERP applications market,
- biggest software company in Europe,
- after Microsoft, the market leader for enterprise application software, and
- 7th biggest software company worldwide.
SAP came from
- 1 pilot product to now 340+ products,
- 1 pilot customer to now 437,000+ customers in 180+ countries, and
- 5 founders to now 98,600+ employees.
Today, 77%+ of the world’s transaction revenue comes in contact with an SAP system.
- SAP’s Casual Chain Starts (1906-1972)
- SAP’s First Steps: from RF to R/1 (1972-1981)
- SAP’s R/2 Epoch (1980-1992)
- SAP’s R/3 Epoch (1992-2003)
SAP’s Causal Chain Starts (1906-1972)
One thing leads to another – this describes best the beginnings of SAP.
It all started with Xerox in 1906.
In 1906, Xerox started as the ‘The Haloid Photographic Company’ with the production of photographic paper and equipment.
In 1959, Xerox came to prominence through the introduction of the first plain paper photocopier.
Today, Xerox still produces and sells print products and services besides digital document goods as a global corporation in 160+ countries.
In 1971, Xerox exited the computer hardware manufacturing industry and asked IBM to migrate its SDS business systems to IBM technology.
At this point, five IBM engineers from Germany from the IBM AI department were working on a project for Xerox on an enterprise-wide system based on SDS technology.
The five men’s names are:
IBM decided that the enterprise-wide system based on the SDS technology project would no longer be necessary due to that Xerox migrates from SDS to IBM technology.
Furthermore, IBM and the five AI engineers could not agree who will work with whom in the next project.
Therefore, the five IBM employees quit IBM and started their own company.
That turned out to be not the worst move.
SAP’s First Steps: from RF to R/1 (1972-1981)
Five former IBM employees have a vision of standard business software that processes data in real-time rather than overnight in punch card batches.
They found SAP and go from a single product in financial accounting (RF) to a modularized ERP system (R/1).
In June 1972, the five former IBM employees founded SAP, which first stands for ‘Systemanalyse und Programmentwicklung’ in German and ‘System Analysis and Program Development’ in English.
SAP establishes its headquarters in Weinheim, Germany, and an office next to Mannheim, Germany.
SAP takes the initial form of a private partnership under the German Civil Code.
SAP’s vision is
- a standard business application software
- for real-time data processing.
Standard software means software that is not developed from the ground up explicit for one customer.
Standard software is not tailored but can be reused for different customers.
For example, Microsoft’s operating system Windows is a standard software because it is suited for almost anyone and runs on nearly every hardware.
In 1972, there did not exist any standard software for business processes.
Real-time data processing software means that the system processes data when the user asks it to rather than the next day as with punch cards.
In 1972, it was still common to use punch cards that allowed companies to store and access information by entering punch cards into computers.
Punch cards were processed in batches mostly overnight.
Punch cards were tabulated into instructions for computers and entered into the computer in batches because one punch card can hold only a tiny amount of information.
SAP envisions instead of punch cards, an electronic database that receives and returns data live in real-time.
For example, when a user enters data into a system that works with punch cards, then the data gets firstly stored in the punch cards, and then the punch cards get processed by the system overnight.
When a user enters data into a system that works with an electronic database, then the data gets immediately processed by the database in real-time.
SAP’s first customer is a German subsidiary of the ICI (Imperial Chemical Industries) in Östringen, Germany.
Östringen is next to Weinheim, SAP’s headquarters, and Mannheim, SAP’s office.
However, SAP’s five founders spend most of their time in the data center of the ICI in Östringen.
SAP develops in 9 months its first pilot product for the ICI.
A financial accounting system called RF (Real-Time Financial) which is a standard software and processes data in real-time.
The ‘R’ for real-time in RF stands for real-time data processing via an electronic database.
The ‘F’ for financial in RF stands for the business area of the system: financial accounting.
SAP’s ERP flagship product versions carry the R for real-time in its name until the release of SAP’s ECC (ERP Central Component) in 2004.
At the end of SAP’s first year in business, SAP has
- 9 employees, and
- DM 620,000+ (USD 1,100,000+) revenue.
SAP completes its pilot product RF for the ICI.
RF runs on IBM servers and DOS/360 (Disk Operating System/360).
SAP uses RF as the cornerstone for additional software modules that are going to come such as
- RM for material management, and
- RP for human resource management.
Later SAP renames module bundle to R/1 (Real-Time 1 Tier).
R/1 becomes SAP’s first ERP system.
Besides the ICI, SAP acquires more customers in southwest Germany such as the
SAP converts its RF from DOS/360 to OS/360 (Operating System/360) in 8 weeks to use more powerful IBM servers.
DOS/360 was an operating system for the less powerful IBM machines.
OS/360 was an operating system for the more powerful IBM System/360 servers.
SAP has 40 customers.
SAP releases besides its RF the RM (Real-Time Material) module.
SAP’s RF and RM form SAP’s R/1.
SAP’s RM is capable of handling a company’s
- inventory management, and
- invoice verification.
SAP vision becomes clear: to integrate all of a company’s applications into SAP’s software.
SAP founds the limited-liability company ‘SAP GmbH’ as a sales and support subsidiary to SAP’s private partnership.
SAP stands for ‘Systeme, Anwendungen und Produkte in der Datenverarbeitung’ in German or ‘System, Applications, and Products in Data Processing’ in English.
The SAP full form differs from SAP’s full form of its private partnership.
SAP’s private partnership full form is ‘Systemanalyse und Programmentwicklung’ in German and ‘System Analysis and Program Development’ in English.
- 25 employees, and
- DM 3,810,000+ (USD 6,762,750+) revenue.
SAP does its first steps abroad: For the first time, SAP installs its software for customers outside of Germany.
SAP relocates its headquarters from Weinheim, Germany to nearby Walldorf, Germany – SAP’s headquarters is up until now in Walldorf.
Two companies in Austria implement SAP’s software.
SAP adds asset accounting to its RF module and, therefore, to its portfolio and completes the implementation of the new software at a pilot customer.
Furthermore, SAP develops a version in French of its RF for the French farm equipment manufacturer John Deere in an in-house project.
SAP’s software has never been in SAP’s possession but rather resided in the data centers of its customers.
Therefore, SAP starts to use its server: a Siemens 7738.
However, SAP locates its server in leased space but SAP begins at the same time the construction of a facility that becomes SAP’s own data center.
Due to an examination of IBM’s database and dialog control system, SAP rethinks its software and lays in the process the foundation for R/2 (Real-Time 2 Tier).
SAP’s R/2 Epoch (1980-1992)
SAP continues its success with the R/2 as the successor of the R/1.
SAP goes in its R/2 era from
- 100+ employees to 1,700+ employees, and
- DM ~24,000,000 (USD ~42,573,600) revenue to DM ~500,000,000 (USD ~887,500,000) revenue.
SAP adds the module RV for sales and distribution to its portfolio.
SAP’s modules are now
- RM, and
SAP moves from its former headquarters in Weinheim, Germany into its new headquarter in Walldorf, Germany.
In its new headquarters, SAP’s development area has 50 workplaces.
SAP upgrades its hardware with an IBM/370-148 additional to its Siemens 7738.
SAP replaces the IBM/370-148 in the same year with a more powerful IBM 4341.
The IBM 4341 has 4 MB main memory.
SAP adds the submodule RM-PPS for production planning and control to its portfolio.
SAP’s R/2 achieves a high level of stability.
SAP attends for the first time the IT (Information Technology) trade fair Systems in Munich, Germany.
The growing power of mainframe servers enables SAP to expand its customer base to 200+ companies.
SAP exists for 10 years.
One of SAP’s founder, Claus Wellenreuther, leaves SAP for health reasons.
Claus Wellenreuther receives a compensation of DM 1,000,000 (USD ~ 1,773,900).
In 1982, Claus Wellenreuther founds DCW Software as a specialist for middle-sized ERP software.
In 2003, SAP acquires DCW Software.
SAP constructs an expansion of its headquarters to create more space for its workforce.
- 100+ employees,
- DM ~24,000,000 (USD ~42,573,600) revenue, and
- 250+ customers from Germany, Austria, and Switzerland.
Heraeus located in Hanau, Germany, is the first company that implements SAP’s RM-PPS (Produktionsplanungs- und Steuerungssystem in German) submodule for production planning and control.
SAP starts a third construction project to expand its headquarters in Walldorf, Germany, to create more space for its workforce.
- 125+ employees, and
- DM 41,000,000+ (USD 72,775,000+) revenue.
SAP continues to develop its modules, especially
- RM-PPS for production planning and control,
- RK for controlling, and
- RP for human resources management.
SAP founds the SAP AG in Biel, Switzerland, as the starting point in markets abroad.
- 163 employees, and
- DM 48,000,000+ (USD 85,200,000+) revenue.
SAP establishes a quality assurance committee to help increase the stability of SAP’s software.
Five SAP employees move from SAP’s headquarter in Walldorf, Germany, to SAP’s new office in Biel, Switzerland, to support the SAP AG and therefore, SAP’s international strive.
SAP’s own data center gets an upgrade and features now
- 3 IBM server, and
- 1 Siemens server.
SAP’s data center has now a total of 64 MB main memory to develop and enhance SAP’s software.
- 250+ employees, and
- DM 61,000,000+ (USD 108,275,000+) revenue.
SAP adds the modules RP for human resources management to its portfolio after three years of development.
SAP opens its first international subsidiary in Wien, Austria.
Furthermore, SAP opens a branch office in Ratingen, Germany to strengthen its presence in western Germany’s Rhine-Ruhr region.
SAP attends for the first time the former world’s largest computer trade show CeBIT in Hanover, Germany.
SAP reorganizes its workforce of now 300+ employees in smaller organizational units led by department managers.
SAP increases tenfold its capital stock from DM 500,000 (USD ~887,500) to DM 5,000,000 (USD ~8,875,000).
New legislation in Germany requires governing balance sheets and generates 100+ new orders for SAP’s RK module for asset accounting.
Due to the batch of new orders, SAP almost doubles its revenue in comparison to the last year to DM 100+ million (USD ~177+ million).
- 300+ employees, and
- DM 100,000,000+ (USD ~177,500,000+) revenue.
SAP starts to develop its R/3 (Real-Time 3 Tier) as the successor to its R/2.
SAP tries to establish norms in software production in regards to the upcoming client-server model through the development of the R/3.
SAP’s R/2 runs on mainframe computers and uses a two-tier architecture:
- client, and
- mainframe computer.
SAP’s R/3 uses a three-tier architecture:
- application server, and
One of the main advantages of the client-server model is that it is compatible with multiple platforms and operating systems, such as
- Microsoft, or
Therefore, the client-server model opens a whole new customer base.
SAP establishes SAP Consulting to support its customers.
SAP founds is first non-German-speaking subsidiary in the Netherlands.
Shortly after, SAP opens subsidiaries in
- Spain, and
- Great Britain.
Furthermore, SAP opens offices in Germany in
- Hamburg in the north of Germany, and
- Munich in the south of Germany.
Plus, SAP expands its headquarters in Walldorf, Germany, with a fifth construction project and opens a training center.
A new IBM server generation enables midsize companies to use SAP software too.
- 500+ employees, and
- DM ~152,000,000 (USD ~269,800,000 ).
SAP starts to develop RIVA to meet the requirement of specific companies.
RIVA is a billing and administration software for utility companies such as energy companies.
SAP opens subsidiaries in
- the United States of America, and
In Walldorf, Germany, SAP opens its international training center.
SAP transforms into the SAP AG.
SAP increases its capital stock from DM 5,000,000 (USD ~ 8,875,000) to DM 60,000,000 (USD ~106,500,000).
SAP issues its initial public offering at a share price of DM 750 (USD ~1331.25) for 1,200,000 shares listed on the stock exchange in Frankfurt, Germany, and Stuttgart, Germany.
SAP welcomes its 1000th customer, which is Dow Chemicals located in the USA.
- 940+ employees, and
- DM ~245,000,000 (USD ~ 434,875,000) revenue.
SAP releases a new user interface for R/2.
SAP focuses on the development of its R/3.
SAP incorporates four Unix systems from different manufacturers into R/3’s development.
SAP invests DM ~85,000,000 (USD ~150,875,000) in research and development – ~33% of SAP’s revenue.
SAP’s data center has now servers from
The data center has a total of 1,224 MB main memory.
The Manager Magazin names SAP ‘Company of the Year’ after SAP’s first year on the stock exchange.
SAP stages its first Sapphire in New Jersey, USA, as its first-ever North American user conference with 250+ attendees.
- 1,400+ employees, and
- DM ~370,000,000 (USD ~656,750,000) revenue,
- offices in 15 countries.
SAP focuses on the development of R/2 and R/3.
SAP completes two prototype modules for the R/3:
- financial accounting, and
- materials management.
SAP increases its capital stock from DM 60,000,000 (USD ~106,500,000) to DM 85,000,000 (USD ~150,875,000) by issuing preference shares to finance its investments:
- SAP invests DM ~195,250,000 (USD ~346,568,750) in research and development,
- SAP invests DM ~135,000,000 (USD ~239,625,000) into the construction of a sales and development center next to its training center in Walldorf, Germany,
- SAP acquires 50% of the German software company Steeb, and
- SAP acquires the German software company CAS.
By acquiring Steeb and CAS, SAP increases its focus on midsize companies.
Due to the Germany reunification, SAP expands to East Germany in a joint venture together with
They call the company SRS and locate its headquarters in Dresden, Germany, which is in former Easter Germany located, and a branch office in Berlin, Germany.
- 1,700+ employees, and
- DM ~500,000,000 (USD ~887,500,000) revenue.
SAP presents parts of its R/3 at the IT trade fair CeBIT in Hannover, Germany.
SAP’s R/3 features a
- client-server model,
- uniform GUI (Graphical User Interface),
- use of dedicated relational databases, and
- support for various server types.
SAP’s R/3 suits as SAP’s R/2 large companies.
But SAP’s R/3 aims as well at
- midsize companies,
- large companies’ subsidiaries, and
- large companies’ branch offices.
SAP starts cooperation with the largest Russian software company ZPS and begins to develop an R/2 Russian version.
- 2,700+ employees,
- DM ~707,100,000 (USD ~1,255,102,500) revenue,
- 14 international subsidiaries, and
- 2,200+ customers in 31 countries.
SAP’s R/3 Epoch (1992-2003)
SAP exists for 20 years.
SAP releases R/3 after successful installations with pilot customers.
Due to expected high demands for R/3, SAP partners with independent consulting firms that SAP calls ‘logo partners’.
Up until now, SAP maintains the strategy of partnering up with independent consulting firms to support its customers.
SAP increases its capital stock from DM 85,000,000 (USD ~150,875,000) to DM 100,000,000 (USD ~177,500,000) to be ready for acquisitions and holdings.
SAP opens its new sales and development center in Walldorf, Germany.
SAP generates ~50% of its revenue outside of Germany.
- 3,157 employees,
- DM 831,000,000 (USD ~1,475,025,000) revenue, and
- 15 international subsidiaries.
SAP starts cooperation with Microsoft to make R/3 runnable on Windows NT (New Technology).
Furthermore, SAP releases a Japanese R/3 version which features Kanji characters.
SAP starts the construction of a development center in Foster City, California, which gives SAP a location near Silicon Valley.
- 3,600+ employees,
- DM 1,100,000,000 (USD ~1,952,500,000) revenue, and
- 18 international subsidiaries.
SAP releases its R/3 for Windows NT – a Swiss company is the first customer.
SAP develops a retail version of its R/3.
By acquiring 52% of the Dacos Software GmbH, SAP aims to speed up the development of the R/3 retail version.
Dacos is a software provider for the retail industry.
IBM starts to use SAP’s R/3.
The contract volume between SAP and IBM is the largest in SAP’s history.
SAP starts marketing activities in China: SAP gives presentations in
- Shanghai, and
SAP opens its 19th international subsidiary in Mexico City, Mexico.
- 5,229 employees,
- DM ~1,800,000,000 (USD ~ 3,195,000,000) revenue, and
- 19 international subsidiaries.
SAP likes to acquire more midsize companies and therefore, strengthens its marketing in this area via system resellers.
Burger King is the 1,000th company that uses SAP’s R/3 HRM module for human resource management.
Microsoft decides to use SAP’s R/3.
The Deutsche Telekom replaces IBM for the contract with the biggest volume in SAP’s history: 30,000 SAP R/3 workstations.
Furthermore, the Deutsche Telekom collaborates with SAP to develop an R/3 industry solution for the telecommunications industry.
SAP gets added to the German DAX stock index.
As in 1989, the Manager Magazin once again names SAP ‘Company of the Year’.
- 7,000+ employees,
- DM ~2,700,000,000 (USD ~4,792,500,000) revenue.
SAP forms a joint internet strategy with Microsoft: Online applications can be connected to R/3 systems via open interfaces.
Furthermore, SAP’s R/3 runs now on IBM’s new AS/400.
Coca-Cola implements SAP’s R/3.
SAP’s Sapphire welcomes
- 8,000+ attendees in the USA,
- 5,000+ in Japan, and
- 4,300+ in Europe.
The Sapphire is an SAP event that aims at its customers, where SAP announces major product changes and strategic directions.
As in 1989 and 1995, the Manager Magazin once again names SAP ‘Company of the Year’.
The European Federation of Journalists names SAP ‘Company of the Year’ as well.
- 9,202 employees, and
- DM ~3,700,000,000 (USD ~6,567,500,000) revenue.
SAP exists for 25 years.
SAP releases R/3 version 4.0.
Further large companies implement SAP’s R/3 such as
SAP’s co-founder Hans-Werner Hector leaves SAP due to financial arguments with SAP’s other co-founders.
SAP decides to enter the NYSE (New York Stock Exchange) in the 3rd Quarter of 1998 to strengthen SAP’s presence in the USA as the most important market for IT.
81%+ of SAP’s revenue comes from outside of Germany.
- 13,000+ employees (~40% increase in comparison to the previous year),
- DM ~6,020,000,000 (USD ~10,685,500,000 ) revenue (~62% increase in comparison to the previous year),
- 2,000,000+ users.
SAP starts the EnjoySAP initiative which focuses on SAP’s end-users and aims to make SAP’s software
- easier to learn,
- faster to work with, and
- simpler to customize to customers’ requirements.
SAP welcomes 15,000+ attendees in Los Angeles, USA, to its 10th Sapphire.
Two of SAP’s founders resign from SAP’s Executive Board and join SAP’s Supervisory Board:
- Dietmar Hopp, and
- Klaus Tschira.
Dietmar Hopp becomes the chairman of the SAP’s Supervisory Board.
SAP’s Supervisory Board appoints SAP’s co-founder Hasso Plattner and Henning Kagermann to co-CEOs.
SAP gets listed on the NYSE.
- 19,000+ employees (~50% increase in comparison to the previous year), and
- DM ~4,300,000,000 (USD ~7,632,500,000) revenue.
SAP releases mySap.com.
mySAP.com combines SAP’s R/3 with e-commerce solutions on the basis of web technologies.
SAP’s first mySAP.com customers are
SAP invests ~15% of its revenue into research and development.
- 20,000+ employees, and
- DM ~5,100,000,000 (USD ~9,052,500,000) revenue.
SAP continues to expand its products and services portfolio and to further evolve from a software component vendor into a solution provider.
SAP enters the markets of
- electronic marketplaces, and
- corporate portals.
For this, SAP outsources its electronic marketplaces and corporate portals area to its SAP portals subsidiary and starts a partnership with Commerce One.
SAP is the world leader for e-business software solutions that integrate processes within and among companies.
Furthermore, SAP is the 3rd largest independent software company worldwide.
- 24,000+ employees in 50+ countries, and
- DM ~6,300,000,000 (USD ~11,182,500,000) revenue (~23% increase in comparison to the previous year).
SAP’s Growth in Figures