Abstract: It is no great revelation that SAP is betting the farm on its NetWeaver infrastructure software. But in my opinion that is not the most important IT investment opportunity, risk, or observation outlined in their March 2006 SEC 20F filing.  In fact, in my opinion, the dependence on the NetWeaver strategy does not even make the top of the list of SAP's 25 IT Investment Research facts you need to know.

 

 

 

What is more important to understand as laid out in SAP's SEC 20F filing and explained in this IT Investment Research document is that "NetWeaver is an almost 10 year old technology." That is not necessarily a bad thing by the way and in its attempt to transform NetWeaver into a business process platform, SAP is playing to the company's strength.  

 

 

 

That stremgth is that "SAP is the long-time but little recognized leader in business process management (BPM)." Many investors consider BPM new functionality because a new technology has emerged in recent years to enable it. Understanding the basis for SAP's past leadership in BPM and the changing dynamics of BPM demand based on new ways of doing business is another important SAP IT investment factor. 

 

 

 

So is the fact  that "SAP no longer cares about ERP, CRM, PLM, SCM, and SRM." In January 2006 SAP said it will stop measuring the company's results by those "solutions" metrics, concentrating instead on its industry metrics. The real secret to SAP's meteoric growth during the 1990s was its industry specificity first and its solution set only to the extent that that set was oriented to various industries. 

 

 

 

But that might be all for naught because "It is not clear that SAP understands and/or assimilates culturally the sea change in the software market." And if SAP does not understand the change and react correctly, by 2020 it will go the way of SSA, McCormick & Dodge, Computer Associates, and other application software companies that have faded from the scent despite the fact that they were larger than SAP as recently as 1990.

 

 

 

As per my methodology described below, this document reviews all of the key verbatims from SAP's annual SEC filing in detail with both technical explanations that I think investors will find helpful and opinions, if warranted, that investors may find actionable. The four SAP IT Investment Research Facts mentioned above are explained in more detail and 21 other SAP IT Investment Research Facts are included. SAP's own words are the source for these facts and analyses.

 

 

 

 

 

 

Methodology

 

 

 

IT Investment Research urges you to read a company's SEC and like material in detail if you are considering investing in any information technology (IT) company including SAP. Reading SEC and like documentation has two advantages:

• First, it is the most accurate description of the opportunity and risk (guys are going to jail for lying in these filings and like material so most executives are going to great length to ensure accuracy)
• Second, the documentation is very complete in terms of describing both the financial and technology aspects of an investment opportunity.

 

However the detail is technically complicated for many investors.  The purpose of this analysis is to explain the most relevant technical aspects of the investment opportunity in terms investors can better understand. This deliverable also explains the technical statements' relevance to the other information provided in the SEC and like documentation.

 

 

 

My analysis is NOT investment advice nor does it attempt to explain the financial aspects of the investment (although some revenue claims are explained in order to put the IT investment opportunity in context).

 

 

 

Copyright, 2006, Dennis Byron