An introduction to SAP

SAP stands for System Analyse Programmentwicklung (System Analysis and Program Development). It is a multinational software company, headquartered in Germany. According to Forbes’s 2019 list, SAP is the third largest software company in the world after Microsoft (1st) and SAP’s fierce rival, Oracle (2nd).

SAP was founded by five ex-IBM employees, namely Dietmar Hopp, Hans-Werner Hector, Hasso Plattner, Klaus Tschira and Claus Wellenreuther in 1972. While they were at IBM, they were working on an enterprise resource planning software project only to be told by IBM that it was no longer required. So, rather than abandoning the project, they decided to leave IBM and start a company on their own called S.A.P. Hasso Plattner is still involved in the company and currently serves as the chairman of the supervisory board, but other founders are not involved in the company anymore.

By the time of writing this blog in 2020, Christian Klein is the CEO, COO and member of the Executive Board of SAP. He joined SAP as a student in 1999, held various positions within the company over the years and on April 20, 2020, was appointed as the CEO of SAP.

SAP’s initial years

None of the enterprise software used by organisations during the 1970s provided the blend of real-time data processing, standardisation and integration. In an era of reel-to-reel tapes and punch cards-based systems, the founders of SAP had the vision to create standard enterprise software that integrated crucial business processes and enabled data processing in real-time. They knew software like that would massively improve the operational efficiency of organisations across the world.

To make their vision into a reality, SAP’s founders and its early employees, worked closely with customers – often sitting side-by-side with employees in customers’ offices to learn their business needs and processes. Using the information and experience gained by working with the customers, SAP was able to come up with software that included those crucial elements which helped them transform from a small German software company into a global leader in business software.

Evolution of SAP’s product portfolio

1975 – 2000

By 1975, SAP’s founders and their initial employees were able to build applications for financial accounting, invoice verification and inventory management. This version was called R1 and was based on a single-tier architecture where the application, database and presentation layer are all installed on one server.

In 1979, SAP started developing R/2, the second generation of its software. What made R/2 stand out from the rest of the enterprise software was its ability to process in real-time on a mainframe computer. R/2 took advantage of the mainframe’s time-sharing option and integrated all of an enterprise’s functions, such as accounting, manufacturing processes, supply chain logistics and human resources.

SAP developed R/3 in 1992. While R/2 was mainframe-based, R/3 was based on the client-server architecture. In R/3, “R” stands for “Real-time data processing” and “3” stands for “3-tier architecture” which is a database, application server and presentation layer (SAP GUI). This client’s server-based architecture enabled their software to be compatible with multiple platforms and operating systems, such as Microsoft Windows and Unix which made it an attractive option for a lot of huge organisations around the world.

2000 – 2020

In 2004, SAP launched a new version of R/3 software with a revised architecture called SAP ECC (SAP ERP Central Component).

In this time period, SAP started to acquire and develop multiple cloud products, an in-memory database called SAP HANA, analytical applications, User experience applications such as FIORI and more recently their flagship product called SAP S/4HANA which runs only on their HANA database.

SAP, what has it become now?

Today, SAP has become a massive name in the software industry. They are the market leader in business software. According to research firm Gartner, SAP has a market share of 22% of the global ERP market, while Oracle, which is their closest rival in this space has a market share of 11%.

Some of the stats about SAP help us to realise how crucial they are when it comes to running big organisations around the world. SAP claims, that 77% of all business transactions worldwide touch an SAP system. For example, SAP’s customers produce 78% of the world’s food products and 82% of the world’s medical devices. Some of the world’s biggest and most successful organisations such as Microsoft, Apple, Walmart, Nestle, Coca-Cola, DHL, Airbus, BMW, Reliance, etc run SAP to perform their day-to-day operations.

SAP serves 440,000 customers in 180 countries around the world. They employ 100,000 people in more than 130 countries including 20 SAP Labs which are development centres.


This post is not endorsed by SAP and does not represent/replace their documentation

Pictures are from OpenSAP course materials