May 10, 2010

The History of SAP

The History of SAP
In 1972, five systems analysts began working nights and weekends to create standard software with realtime data processing. Twenty-five years later their vision is a reality: SAP is the world's market and technology leader in business application software.

On April 1, 1972 five former IBM employees founded SAP as Systemanalyse und Programmentwicklung (“Systems Analysis and Program Development”) in Mannheim, Germany. Their vision was to develop and market standard enterprise software which would integrate all business processes. The idea came to them through their work as systems consultants for IBM when they noticed that client after client was developing the same, or very similar, computer programs. The second part of their vision was that data should be processed interactively in realtime, and the computer screen should become the focal point of data processing.

From a start-up software vendor to global market leader
Over the course of twenty-five years, their vision has transformed SAP from a small regional enterprise into a world-class international company. Today, the SAP Group is the global market leader in enterprise resource planning software, and has subsidiaries, affiliates and branch offices in nearly every industrial nation in the world. Important milestones in the company's corporate history include its conversion to a GmbH (a closely-held corporation) in 1977, the opening of the company's headquarters in Walldorf, and its conversion into a publicly-held corporation whose shares are listed on several stock markets.

By changing its structure to a publicly-held corporation, SAP significantly strengthened its capital base and laid the foundations for its employees to enjoy more of a share in the company's success. In the end, it is SAP's employees – currently more than 9,000 of them - whose know-how, motivation and performance have nurtured the company's progress. And it is their commitment and innovative drive which will pace the company's future success and keep it ahead of the competition.

Over one million R/3 users

Products have played the central role in SAP's success story. In this area, two milestonesstand out: first, the development and 1979 market release of the R/2 software system for mainframes, and, second, the R/3 client/server software system introduced in 1992. Since its debut, the R/3 System use has grown explosively and now accounts for the lion's share of SAP product sales. At present, more than one million end users around the world work with the R/3 System.

The development of SAP products has continually benefited from major advances in the hardware sector. Back in 1972, the limited storage capacity of computers posed one of the biggest challenges. In those days, mainframes only had 500 kilobytes of storage capacity. Slow data input and output meant that only partial applications with a limited data volume were feasible. It was against this technological background that SAP signed its first customer, the German ICI subsidiary in Östringen.

With the successful implementation of its initial project, SAP had nine employees and, at the end of its first fiscal year, posted a profit on revenues of DM 620,000. In the second year of operation, two local businesses – the tobacco and cigarette manufacturer Roth-Händle and the pharmaceutical company Knoll - selected the newly developed SAP Financial Accounting (RF) System. This system quickly earned a reputation as an excellent standard package and installations expanded to 40 customers. But product development did not slow on this success, and a second standard product, the Materials Management (RM) System, with modules for purchasing, inventory management and invoice verification, soon followed. The benefits of SAP's integration philosophy showed through, with data from Materials Management flowing straight into Financial Accounting.

R/2 System goes international
SAP's close relationships with customers led to continuous enhancements in the existing program modules, while important new additions were made, such as the Cost Accounting (RK) System. The R/2 System was now ready for the international market. New computers with drastically improved price/performance ratios helped expand the customer base, and SAP raised its profile still further by appearing at the Systems trade fair in Munich - the company's first-ever presence at an industry trade show.

In 1982, SAP celebrated its tenth anniversary, with sales soaring 48% to over DM 24 million. By the end of the year, 236 companies in Germany, Austria and Switzerland were working with the SAP standard programs. Sales continued to climb in the following year, increasing by 45%.

In 1984 SAP took additional steps into the international arena with the founding of SAP (International) AG in Switzerland, whose focus was to increase sales of the R/2 System in international markets. Development teams began work on two new applications, Personnel Management and Plant Maintenance, while the Production Planning and Control System was installed at its first pilot customers.

1985 was characterized by further expansion. The Walldorf headquarters had grown to 10,000 square meters of space, while at the Swiss subsidiary a new headquarters was occupied. SAP systems were now in use in most European countries, and SAP began to penetrate markets outside Europe - with customers in South Africa, Kuwait, Trinidad, Canada and the US.

SAP goes public
SAP continued to grow in 1988 with the international sales network strengthened by the establishment of subsidiaries in Denmark, Sweden, Italy and the US. Other events included: the founding of SAP Consulting GmbH as a joint project between SAP and the consulting firm Arthur Andersen; the opening of an International Training Center in Walldorf; and the welcoming of Dow Chemical as SAP's 1,000th customer. However, the most significant events of the year were the increase of SAP's capital stock from DM 5 million to DM 60 million, the subsequent conversion of SAP GmbH into a stock corporation, SAP AG, and the flotation of SAP shares on the stock market. SAP shares were quoted on the securities exchanges in Frankfurt and Stuttgart.

During the next year, 1989, SAP shares began trading on the Zurich stock exchange. SAP expanded its alliance and strategic cooperation approaches by taking a majority investment in TOS GmbH in Freiberg. Through the "International User Conference" in Lausanne, Switzerland, and the first "SAPPHIRE" user conference in North America, SAP demonstrated its solid commitment to direct international customer contact. This crucial commitment was to become more and more important to SAP's success in the coming years.

SAP develops Russian R/2 version
Strong growth continued unabated in 1991. The acquisition of Steeb GmbH was completed and its activities were merged with CAS to form STEEB-CAS GmbH, creating a high-caliber software company with an attractive product offering for the small- and medium-sized company market. With SAP's Eastern European business developing quickly, SAP collaborated with a local Russian software company to develop an R/2 version in Russian. The first Japanese installation of SAP software was successfully completed. At the end of the fiscal year, the SAP Group boasted 2,225 customers in 31 countries and sales of more than DM 700 million – an increase of over 40 percent. The company had more than 2,500 employees.

In its twentieth year, SAP opened a new Development and Sales Center in Walldorf. The two-year project cost roughly DM 140 million and represented the company's largest single investment to date. In preparation for additional development, SAP's share capital was expanded by DM 15 million to DM 100 million through the issue of 300,000 preference shares. SAP was now firmly established as a global company, with South Africa, Malaysia and Japan the newest additions to its 15 subsidiary companies. By 1992, almost half of the DM 831 million in product revenues were being generated outside Germany, and the availability of the software in 14 different languages was adding significantly to its attractiveness.

Shipment of the client/server system R/3

With the R/3 System release in mid-1992, SAP began to penetrate the mid-size market, and into branches and subsidiaries of large companies. The release of the R/3 client/server system was the most significant event in SAP's history and started a record of growth that even SAP's most optimistic planners had not predicted.

SAP took top position among German software vendors in 1993. On an international scale, the company moved to 7th place among software companies, establishing a clear lead in the global business applications software market. Sales surpassed the important DM 1 billion mark for the first time in 1993, and the global customer base stood at 3,500 companies. SAP made an investment in iXOS Software GmbH with the aim of developing and marketing graphical user interfaces and optical archiving of documents.

The R/3 architecture is comprised of application and database servers. The application servers house the software and the database servers handle document updates and master file databases. The system can support an unlimited number of servers and a variety of hardware configurations. For more info. see SAP R/3 Architecture at SAP home page.

SAP R/3 is based on various hardware and software architectures, running on most types of UNIX, on Windows NT and OS/400. For more info...seeSAP R/3 Platform Support at SAP home page.

SAP R/3 runs on several databases Oracle, ADABAS D, Informix, DB2 for UNIX, DB2/400, Microsoft's SQL Server 6.0. For more info...see SAP R/3 Databases at SAP home page. Since R/3 foundation, SAP has made significant development and installed thousands of R/3 systems.


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