Necessity is the mother of all inventions, profitable or not, that is debatable. But innovation on the other hand requires a vision, with profitability of the enterprise in its heart. Back in the 1970s different companies, big and small, used IBM machines for their business needs, and built management programs on them. Five system analysts at IBM observed that everyone was basically building the same management software for themselves, programming on similar lines by investing lots of money on in-house programming. They thought that if they could provide a solution to answer these needs of different enterprises, it would be more profitable and the set up time for these companies could be drastically reduced. Hence, these five IBMers, Dietmar Hopp, Klaus Tschira, Hans-Werner Hector, Hasso Plattner and Claus Wellenreuther devoted their nights and weekends in developing market standard enterprise software meant for real time data processing for integrating all the business processes. As a result of their efforts, SAP was born.
SAP , today has subsidiaries in more than 50 countries around the globe and is one of the largest software companies (third largest revenue independent software provider) in the world employing more than 27,000 people and serving over 17,500 customers which include more than half of the 500 top companies. It has more than 44,000 installations in more than 120 countries and more than 10 million people benefiting from SAP ECC. It mainly focuses on 6 major industries: Consumer, Process, Financial, Discrete Industries, Public Services and Service Industry. It has Industry partners in strong companies like Adobe, CA Technologies, HP, IDS Scheer, Open Text, Smart Ops etc. and is backed by a strong SAP Develop Network (SDN) community, sharing knowledge via blogs, forums, training materials and libraries. SAP claims to grow by providing quality solutions unlike many of its prominent competitors like Oracle which spend huge sums of money in acquiring competitors.
When Xerox decided to move out of the computer industry, it wanted to retain IBM technology in its business systems. As a part of the migration costs, IBM acquired software named SDS/SAPE which was later given to the founding members of SAP for about 8% founding stock of the company. The company established its headquarters in Weinheim and office in Manheim, Germany on April 1, 1972, registered as a private partnership under the German civil code as ‘Systemanalyse und Pogrammentwicklung’ (Systems Analysis and Program Development) though most of the time of the founding members was spent in the offices of their first customers, the local branch of Imperial Chemical Industries (ICI). By the end of its first year of operation, SAP employed 9 people and had generated DM 620,000 as revenue.
1973 saw the completion of the first accounting system by SAP, named RF, which proved to be a strong foundation in the development of subsequent software modules by SAP which were named SAP R/1. In addition, the company grew from regional to a much wider level developing customers in other parts of Germany like the tobacco company Rothandle and pharmaceutical firm Knoll. Within two years, SAP garnered support from 40 reference customers and the trademark began to emerge. In 1976, a limited-liability company ‘SAP GmbH, Anwendungen und Produkte in der Datenverarbeitung’ was founded and after five years, the private partnership was dissolved with its rights being passed on to SAP GmbH. By the end of 1976, SAP’s 25 employees had generated DM 3.81 million as revenue. SAPs history is sprinkled with success stories of growth from a regional private partnership to a multinational software firm.
The next major leap in the company’s profile came in 1978 when the R/2 System was released. R/2 ran on mainframe computers and was the first integrated, enterprise package. It was extremely popular with large European MNCs requiring soft-real-time business applications with multi-currency and multilingual support. As the sales headed towards the DM 10 million mark, SAP brought all its teams under one roof in its new Computer Centre in Walldorf which now is the company’s headquarter. By that time, 50 of the 100 largest industries of Germany were being served by SAP. Working in close co-ordination with its customers, SAP added various modules to its R/2 before it went international. The side by side evolution of computers improved the price/performance ratios and hence acting in favour of the company. By 1982, sales were up by 48% and more than 236 companies in Switzerland, Germany and Austria were working on SAP programs.
SAP AG was founded in Switzerland, focusing on the increase of sales of the R/2 System internationally. The development teams started to work on newer modules like Personnel Management, Plant Maintenance, Production Planning and Control Systems. By 1985, SAP had become a well-known name in all European countries. The company continued to grow with the opening up of new subsidiaries in new places. A major part of improvements in the SAP Solutions is attributed to their partnership with educational institutes like California State University. In 1988 amidst all high growths in international segments, SAP GmbH converted into a stock corporation SAP AG and floated its stocks. In 1989, SAP won the ‘Company of the Year’ award for the first time (twice after that) by Success Manager Magazine.
By the end of the 1980’s era, the world had started to migrate towards client-server architecture. Keeping up with its past record of ample flexibility, SAP released its R/3 Systems to cater to these Client-Server configurations. ‘R’ stands for real and ‘3’ for a 3 tier system in R/3. The three tiers are: Presentation Server (GUI), Application Server and Database Server. Launched in 1992, it was an instant hit, especially in North America where the market share of SAP shot up from virtually zero to a whopping 44% of SAPs worldwide sales, bagging the confidence of many fortune 500 companies. The list is very impressive with 8 of the top 10 semiconductor companies, 7 of 10 pharmaceutical companies and giants like Microsoft appearing in it. This release was mainly aimed at the mid-sized market segment. It was arranged into distinct interlinked modules which covered different explicit functions in an organization, the most popular being Financial and Controlling (FICO), Material Management (MM), Sales and Distribution (SD), Human Resources (HR) and Production Planning (PP). SAP has focussed on best practice methodologies in its software processes. In order to cater to particular industries, it has developed Industry Specific (IS) modules. By 1997, SAP had partnerships with more than 25 educational institutes including MIT which greatly contributed to its improvement.
Application Server interprets ‘Advanced Business Application Programming / 4 th Generation’ (ABAP/4) programs through a collection of executable files and manage Input/Output. All executables start at the same time and stop at the same time. An inventory of these processes is maintained in the AS in a file called Single Configuration File. The serve may be a single standalone, or distributed over different servers with distributed functions like messaging servers. AS formats and forwards database requests to a database server. Database Server caters to the data storage and manipulation like addition, retrieval and updating. All server to server transactions are encrypted by a SAP cryptographic library. In its core, SAP R/3 had about 10,000 tables which controlled the process execution.
The major difference between SAP R/3 and ERP (Enterprise Resource Planning) is that ERP is based on SAP NetWeaver where core components can be implemented in JAVA and ABAP and each new component is developed independently in a self-contained manner. The first release of mySAP ERP launched in 2003 bundled separate products like the SAP R/3 Enterprise and SAP SEM etc. and was an important move in embracing the internet. Application Server was wrapped into NetWeaver, introduced in 2003. SAP ERP was later renamed as ECC (ERP Central Component) in its further releases accompanied by architectural changes like merging of SAP SEM and SAP Internet Transaction Server into ECC. Every SAP system communicates with other clients using SAP specific and http/https protocols. Along with ECC, SAP Business Suite comprises of 4 other applications:
